Taser 2.0? Sandisk Builds Back-to-Back High Tight Flags

How Taser Shocked Wall Street in the Early 2000s

In 2002, “stun gun” maker Taser, now called Axon Enterprise (AXON), went on one of the most stunning runs in Wall Street history. From late October 2002 to its top in December of 2004, Taser soared from $0.40 to $33.45, registering a mind-blowing 8,262.50% return.

What drove Taser’s euphoric move? The answer is the perfect storm of product innovation, luck, and a lack of competition. In 2003, Taser perfected its non-lethal weapon, the TASER X26. Because the X26 was less bulky and lighter than its early models, Taser was able to become the gold standard of non-lethal technology for police departments across the country.

Gone were the days were police only had the difficult binary choice of using lethal force or no force at all. Meanwhile, because the 9/11 tragedy had recently occurred, Taser was able to win funding from the U.S. Department of Defense (DoD) to provide its stun gun technology to the military and pilots (to use as a defense against hijackers. By the end of 2003, over 4,000 law enforcement agencies had adopted Taser’s technology.

Taser: Buy High, Sell Higher

 On Wall Street, hindsight is 20/20. Prior to its massive move, Taser was an illiquid, unknown company, that had registered negative returns. That said, investors could have still made life-changing fortunes by latching onto the stock after it had already registered triple-digit revenue growth and had gained 1,000%.

Taser: Back-to-Back High Tight Flags

William O’Neil was one of the greatest growth investors of all-time. O’Neil gained popularity with his unique view of markets. Instead of solely relying on either technicals or fundamentals, O’Neil used both to gain an advantage on Wall Street, ultimately making a fortune. Some of O’Neil’s most profitable trades came from his high-tight flag pattern in stocks like Qualcomm (QCOM) (in 2000) and Taser in 2003.

What is an O'Neil High-Tight Flag?

In O’Neil’s classic book, “How to Make Money in Stocks” he identified Wall Street’s “great paradox.” That is, “What seems too high and risky to the majority usually goes higher, and what seems low and cheap usually goes lower.” In other word’s O’Neil believed that investors should buy momentum and power instead of looking for bargains. The high tight flag is the most extreme example of this concept. An O’Neil high tight flag can be identified by the following traits:

1.      A stock must move 100% or more within 4 to 8 weeks.

2.      After the flag pole is built, the stock should rest, correcting no more than 25% over the next 3 to 5 weeks.

3.      Finally, a breakout above the previous high triggers the high tight flag.

In the early 2000s, Taser did the unthinkable and broke out of two consecutive high tight flags.

Sandisk: Shades of 2003 Taser

“There is nothing new in Wall Street. There can’t be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again.” ~ Jesse Livermore

So what relevance does 2003 Taser have to 2026? Zacks Rank #1 (Strong Buy) stock Sandisk Corporation (SNDK) has a nearly identical pattern to 2003 Taser. In January, SNDK shares broke out of a classic high tight flag pattern and provided investors with a 154% gain in just four weeks. Since then, the stock has consolidated in a shallow 25% range, forming another potential high tight flag pattern.

Sandisk is Growing Fast and is Catalyst Rich

Sandisk designs, develops, and manufactures NAND flash-based memory cards and storage devices used in data centers and AI workloads. Like Taser, the stocks blistering move is backed by explosive fundamental growth. In fact, Zacks Consensus Estimates suggest that the company will grow its annual earnings by triple-digits through 2027.

Meanwhile, similar to the Taser precedent, Sandisk has a unique catalyst. Amid the AI data center building frenzy, demand for NAND technology is outstripping supply, leading to juicy margins.

Bottom Line

The meteoric rise of Taser in the early 2000s serves as a powerful reminder that life-changing fortunes are often found by embracing strength rather than searching for bargains. With its back-to-back high tight flags and its explosive fundamental catalysts, Sandisk is following the historic path of Taser in 2003.

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This article originally published on Zacks Investment Research (zacks.com).

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