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After surging, SanDisk fell back to its starting point overnight—what should be done next?

AI tech stocks changed dramatically overnight. All three major US stock indexes closed lower overnight, with the Nasdaq plunging 1.3%. South Korean stocks even triggered a circuit breaker at the open this morning, while SK Hynix and Samsung Electronics both fell more than 7%. SanDisk, which had investors celebrating and making profits just yesterday, also fell back to its starting point overnight. So, does this sharp tech-stock decline signal a return to a bear market, or was it a sudden “black swan-style” flash crash? Can SanDisk still be traded going forward? Xiao Caishen believes today’s plunge was mainly a pullback caused by panic spilling over from US Treasury selling, combined with the need for tech stocks to correct after excessive short-term gains. The sharp decline may be an opportunity to add to long positions:

I. SanDisk market analysis:

Yesterday’s bearish candle directly broke below the 5-day moving average, breaking the steep short-term upward slope. RSI quickly pulled back from overbought territory, releasing some of the overheated momentum. The daily MACD red bars began to shorten, with the first notable pullback appearing at a high level. This is a technical correction following a surge and has not yet produced a clear trend-reversal signal.

Key support and resistance levels:

First support: $1,500-$1,530, corresponding to the lower edge of the gap from August 13 and serving as a key platform support for this rally; strong support: $1,400-$1,420, the starting point of the Investor Day rally.

First resistance: $1,640-$1,670, corresponding to last week’s high and the 50% Fibonacci retracement level; second resistance: the $1,700 round-number level.

Fundamental analysis:

The fundamentals continue to follow the core logic from Investor Day on August 13: $94 billion in NBM long-term agreements have locked in shipments for the coming years, 50% of 2027 capacity has already been secured, and the long-term guidance of an 80%+ gross margin and a 50% free-cash-flow margin remains unchanged. The market is still digesting the valuation-restructuring logic of its “transition from a cyclical stock to a long-term certainty asset,” and no fundamental negative catalyst has emerged in the short term.

II. How to view the plunge in US and South Korean stocks:

Last night’s plunge in US stocks was not accompanied by any news catalyst and was not a “black swan” caused by negative news. At present, as long as the Federal Reserve does not signal a clear rate hike, the long-term bull-market structure in US stocks will not change. As for the Nasdaq, the index surged strongly after touching the 60-week moving average, the dividing line between bull and bear markets, also confirming that this bull market has not ended. Yesterday’s plunge was more of a technical correction after the index rose too quickly in the short term and deviated from the 5-day moving average. As for South Korean stocks, Xiao Caishen previously also shared that after the Ministry of Finance adjusted the margin thresholds for individual-stock ETFs, South Korean stocks had already undergone a certain degree of deleveraging. The South Korean stock market is more likely to consolidate with volatility going forward, and the South Korean government cannot possibly allow another surge or collapse. So everyone can rest easy. Although the index appeared to trigger a circuit breaker today, it recovered somewhat toward the close, while trading volume did not increase significantly and there was no panic selling. A rebound will likely occur over the next two days, making this a good opportunity to buy the dip in leading stocks such as SK Hynix.

III. Outlook and trading strategy:

After the sharp short-term decline, US and South Korean tech stocks represented by SanDisk, especially those in the memory sector, will most likely rebound. The core logic of the memory supercycle plus the NBM business-model revolution remains unchanged, and institutional consensus on the sector’s long-term prospects remains intact. A major pullback may instead attract new funds to establish positions. SanDisk’s sharp premarket rebound this afternoon is the best example.

For SanDisk, holders can retain their core positions and raise their stop-loss level to $1,500; if it breaks below that level, reduce positions to lock in part of the profit. Those without positions can open an initial long position below $1,600, with a somewhat larger allocation, and target taking profit around $1,700-$1,750. For other tech stocks, such as SK Hynix and Micron, long positions can also be established at the corresponding levels. For long-term investors, after establishing a position, they can initially refrain from setting a take-profit level and focus on the bigger picture😀

What do you think of this round of sharp declines? Has anyone been bold enough to buy the dip and already made profits? Leave a comment and share your results!$SNDK $MU