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Technology Stocks : WDC/Sandisk Corporation -- Ignore unavailable to you. Want to Upgrade?

To: Tumbleweed who wrote (5377)	4/13/1999 8:06:00 AM
From: Art Bechhoefer	Read Replies (2) \| Respond to of 60323

Joe and Craig, if you see some higher than normal volume activity today and tomorrow, it could explain in part the weakness we have seen over the past four weeks. Here's the scenario I see: Upon reaching the high 30's, SNDK shares were subject to short selling by traders looking for an opportunity to buy back at much lower prices. Because of the fairly low float and relatively low volume, a relatively small amount of short selling can trigger substantial downward pressures. Some of the pressure may also have been generated by a very risky tactic - the sale of uncovered (naked) call options at striking prices above the market price. The stock price has dropped just about 50 percent over the past four weeks, as a result. If the traders believe that earnings will be at least flat, compared with last year, and that sales volume will increase enough to give a picture of an expanding market, then they'll jump back in before the release of earnings after the market close on Wednesday. The added volume could drive the shares up perhaps one or two points today and tomorrow. If the earnings are even slightly better than last year, there will be a wave of buying and short covering. It's unfortunate that the shares of good, small companies are subject to this kind of whiplash, which does nobody any good, except for short term traders who happen to guess right. The same sort of action used to afflict QUALCOMM for about three or four years after it went public in 1991. But as more people built up confidence in QCOM, the actions of the short sellers proved less and less effective. If there are any left now, they've really lost their shirts, as the stock in the last two weeks has more than doubled to a new high of 162. There is another parallel here. QUALCOMM had ongoing fights over patents with much larger companies - Motorola, Ericsson, etc. - and won them all, the latest being a settlement agreement with Ericsson. SanDisk will probably also have a showdown with Lexar and maybe Toshiba. It won its first showdown with Samsung. Art