u/danieleateggs

I notice that many of you guys in this thread are asking why the price of Sandisk is falling despite strong fundamentals and catalysts, well here is my take:

In the market, there are at least two “forces”.

Fundamentals and mechanical

Fundamentals refer to earnings, capex, demand etc.

Mechanical refers to volume, momentum, leverage, algo etc.

In the long run, stock price should go up because of good / strong fundamentals.

In the short run, stock price can go up or down due to mechanical (“rug pull” or CTAs buying or selling etc.)

Stock price can decouple from fundamentals temporarily

Temporarily may be days, weeks or months.

That is why even though Sandisk’s fundamentals are extremely robust, the stock is still going down. Same thing for other names in the memory sector.

Summer is always a difficult time to trade as liquidity is thin and volatility is high, institutions are rotating money out of the memory sector and will likely rotate money back in when memory stocks become cheap again.

I believe that institutional volume will be rotated back into memory after summer, so around the start of September and we could see all time high again in October. But till then I think memory stocks will continue to be in a downtrend.

For those holding the actual SNDK stock, you may continue to hold since there is no leverage and no volatility decay. However, for those holding onto leveraged ETFs I would suggest being more careful. Capital preservation comes before profit, it will be much harder to make money if your capital shrinks significantly due to leverage and volatility decay.

I am overall still BULLISH on Sandisk and memory in the longer term, but BEARISH in the short term (next few weeks).

I would not recommend buying any large positions when liquidity is thin. I have also learnt that the hardest thing to do in the stock market is to do NOTHING! So if you really want to have a position, open micro-positions every time there is red day so that you can constantly lower your average cost while not losing much money since the position size is tiny.

The purpose of this post is to help new investors understand the different forces that move the market and make informed decisions to protect capital.