Bill Cara: Sandisk, Lexar hammered for no good reason, Thurs., Jan. 26, 2006, 4:44 PM

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January 26, 2006

Sandisk, Lexar hammered for no good reason, Thurs., Jan. 26, 2006, 4:44 PM

Once again, right into the earnings conference call and immediately after it, the stock of Sandisk (NDQ: SNDK) gets hammered. So too is Lexar (NDQ: LEXR). As you know, flash memory is a very exciting technology that the world can't seem to get enough of.

I'll take management for their word on this one. I believe the growth rates will continue through the year and beyond. Sandisk is on the Cara Global Best 100 Companies list. With the RSI falling down to 48 on the Weekly data (which will go lower with the after-hour trades), and LEXR going to 20 on the RSI (7), both are now in my Accumulation Zone.

If you are buying tech stocks, these two are candidates.

All I can think of about the current selling (it's merciless after-hours) is that money managers are watching the metals rally and are getting concerned that interest rates are sure to follow. That would hurt the high PE techs. But surely, these two are better than GOOG.

Btw, in after-hours trading this afternoon, SNDK dropped a further -8.6 pct from today's close at $70.68 to end the day at $62.05.

And LEXR dropped a further -7.3 pct from today's close of $7.57 to end the day at $7.02.

As trading volume was not excessive, I recommend you look into these situations. As you know, I like to buy into weakness like this. But I also want to check to see what has happened to cause such excessive selling.

Posted by Posted by Bill Cara on January 26, 2006 04:44:12 PM | Category: 45 Info Technology , Flash Memory

Discourse

here is a link to one persons opinion. seems to be a lot of bulls and bears out there.

ghttp://money.cnn.com/magazines/fortune/fortune_archive/2006/02/06/8367940/index.htm

maybe he has shorted goog?

I think it was in bill o'neils book i read that a sign of a bull market comming to an end is a rise in rail stocks.

Posted by: Bullring at January 26, 2006 5:20 PM [link]

William O'Neil was right. The V-shaped cup with the very short handle which SNDK made is failure prone. The handle at the end of December (around $60-$65) lasted only a few days.

His IBD newspaper even said SNDK was making a V shaped base.

A good cup and handle has a cup with a U shape. V shape is more risky.

BRCM, on the other hand, has tight bases (a sign of accumulation) and exploded after earnings today.

Posted by: MLC at January 26, 2006 11:36 PM [link]

Dear Bill, Let me help explain why this drop has taken place and let you comment back with your justification

- Good results but predicts a soft first quarter thus they are going to "CUT" prices by 25-35% to reign in demand. To me that seems like a ford style strategy and a sign of a slowdown. They call this a "Seasonal" slowdown. Perhaps it is as the pent up buying by manufacturers and retail customers may have seen peak demand in Q4

- Let me continue by saying price cuts in the past have worked in favor of these firms and by predicting a sob story now they can beat the next quarter rather than dissapoint twice

- Analysts feel that Hynix and Micron are competing hard with SNDK and there may be futher drops in price or "over supply"

- I figure Bill and Friends this could also be a move by very tactical and smart management to simply beat earnings

Point in case: AAPL / YHOO - If you do well you must raise the bar - analysts will keep raising the bar and expecting more, it becomes unrealistic for the company. Company figures we need to take a little bath or we're really going to miss. A small bath now and we can recoup this as the story may not be as grim as we paint presently.

Posted by: dinov at January 27, 2006 10:42 AM [link]