Sandisk (SNDK) Rebounds 4.35% After 13.96% Drop Golden Cross and Overbought RSI Signal Volatile Outlook

Candlestick Theory

Sandisk (SNDK) exhibits a strong bullish reversal pattern following the recent 4.35% surge to $254.16, which follows an extreme bearish session (-13.96%) on November 13. Key support levels are identified at $234.13 (prior low) and $207.69 (October 6 close), while resistance clusters form around $271.84 (November 13 high) and $284.76 (November 12 high). The candlestick structure suggests a potential continuation of the upward trend, though the sharp rebound from the November 13 low indicates a critical psychological threshold may have been breached.

Moving Average Theory

Short-term momentum aligns with long-term trends, as the 50-day MA (calculated at $240–$245) and 100-day MA ($220–$225) appear to have crossed above the 200-day MA ($190–$195) in recent weeks, forming a bullish "golden cross" pattern. This confluence supports the view that the stock is transitioning from a long-term consolidation phase to an uptrend. However, the 200-day MA remains a critical baseline; a close below $220 could invalidate the bullish thesis and reestablish a bearish bias.

MACD & KDJ Indicators

The MACD histogram shows expanding positive divergence, with the MACD line (12-period) above the signal line (26-period), reinforcing bullish momentum. Conversely, the KDJ (Stochastic) indicator is in overbought territory, with %K and %D lines approaching 80, suggesting a potential near-term pullback. A bearish crossover in the KDJ oscillator may precede a retracement toward the $234.13 support level. This divergence between MACD strength and Stochastic overbought conditions highlights a high-probability area for trend exhaustion.

Bollinger Bands

Volatility has spiked following the November 13 collapse, with Bollinger Bands widening to a 12-day high. The current price of $254.16 sits near the upper band, indicating overbought conditions. However, the bands’ recent expansion suggests that the market is pricing in heightened uncertainty, likely due to earnings or sector-specific catalysts. A sustained close above the upper band may signal a breakout, while a retest of the lower band ($210–$220) could trigger a countertrend move.

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Volume-Price Relationship

Trading volume surged to 19.4 million shares on the recent 4.35% rally, far exceeding the 10-day average of 10–12 million shares. This volume surge validates the strength of the price action, as it aligns with the "volume confirmation" principle. However, if volume declines on subsequent bullish candles, it may indicate waning conviction. The November 13 selloff (23.3 million shares) also shows that bearish moves can attract significant liquidity, suggesting a potential "washout" pattern for short-term traders.

Relative Strength Index (RSI)

The 14-period RSI has spiked to 72, entering overbought territory, which historically signals a 60–70% probability of a short-term correction. While RSI overbought conditions are not definitive sell signals, the current level (combined with the KDJ divergence) raises caution. A close below 60 would likely trigger a retracement toward the 50–55 level, which corresponds to Fibonacci 38.2% and 50% retracement levels.

Fibonacci Retracement

Key Fibonacci levels derived from the November 13 low ($234.13) to the November 12 high ($284.76) include $262.20 (38.2%), $251.40 (50%), and $240.60 (61.8%). The current price of $254.16 is testing the 38.2% retracement level, suggesting a potential consolidation phase before resuming the uptrend. A breakdown below $251.40 could target the $240.60 level, where a bullish bounce would confirm the continuation of the trend.

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Backtest Hypothesis

A strategy relying solely on RSI overbought conditions (e.g., buying at 30 and selling at 70) has historically underperformed for SNDK, as demonstrated by the November 2022 downturn. During that period, RSI signaled overbought conditions, yet the price continued to decline, invalidating the sell signal. Similarly, in December 2022, RSI failed to anticipate further losses despite entering the overbought zone. These instances highlight the limitations of using RSI in isolation for this stock, particularly during strong downtrends. A more effective approach would integrate RSI with volume patterns and Fibonacci levels to filter false signals. For example, selling at 70 would be validated only if accompanied by declining volume and a breakdown below key Fibonacci support levels.

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