Sandisk Corporation (Sandisk (SNDK)) shares were up 2.3% in premarket trading Thursday, riding a wave of technical buying and sector-wide stabilization in the semiconductor space.

The move comes after a rough few days. A massive chip rout earlier this week—triggered by profit-taking following Samsung Electronics Co.'s second-quarter earnings report—sent stocks tumbling. But Asian benchmarks like South Korea's KOSPI bounced back, and U.S. data-storage equities followed suit. Nasdaq futures were up 0.53% and S&P 500 futures gained 0.13%, setting a positive tone.

Investors who sat through the sell-off are now dipping their toes back in, buying the dip. But there's more to the story than just a rebound.

Short Interest Is Rising

Short interest in Sandisk increased during the last reporting period, jumping from 9.21 million shares to 10.91 million shares. That means 11.56% of the company's publicly available shares are now sold short. Based on recent average daily volume of 11.01 million shares, it would take short sellers about one day to cover their positions—not a huge squeeze risk, but a sign that bearish sentiment is building.

Analysts See Opportunity

Not everyone is bearish. Ross Gerber, CEO of Gerber Kawasaki, took to X on Tuesday to call the chip sell-off "a gift for those that want to retire." He argued that investors selling semiconductor stocks were "captured by very short term thinking" and labeled semiconductor companies "some of the least expensive stocks in the market."

That's a bold take, but it's worth noting that the sector has been under pressure, and valuations have come down.

Citi Warns of Chinese Competition

But there's a longer-term cloud on the horizon. In a Wednesday CIO Weekly Bulletin, Citi Wealth warned that domestic memory chips from China are "gaining international recognition." That could create pricing pressure for incumbents like Micron Technology Inc. (Micron (MU)), Sandisk, and Western Digital Corp. (Western Digital (WDC)).

Citi said this emerging validation could create a persistent "margin overhang" narrative, capping upside contract pricing for DRAM and NAND in commoditized segments. In plain English: Chinese competition could keep a lid on profits for these companies.

Technical Levels to Watch

Despite the recent pullback, Sandisk's longer-term trend is still bullish. The stock is trading about 51% above its 100-day simple moving average ($1,185.04) and roughly 146% above its 200-day SMA ($727.38). That's a steep uptrend by any measure.

But the short-term picture is more mixed. SNDK is trading 8.6% below its 20-day SMA ($1,958.12), which frames the current setup as a pullback inside a broader bullish structure rather than a clean breakout attempt. The Relative Strength Index (RSI) sits at 47.19—neutral territory, suggesting the stock has worked off prior overbought conditions and is trying to stabilize.

Here are the key levels to watch:

• Key Resistance: $1,861
• Key Support: $1,514.50

If Sandisk can break above $1,861, it could signal a return to the uptrend. If it falls below $1,514.50, the pullback could deepen.

For now, the stock is up 2.3% at $1,766.90 in premarket trading. The next few days will tell us whether this is a dead cat bounce or the start of a real recovery.