Armor Holdings, Inc. (AH)
1/16/07 Update

We had stopped out of AH after recommending it earlier in August.  The stock had a nice price surge early on, then sold off sharply, its fourth wave decline from April apparently still incomplete. I had noted in a previous Wave Watch update that we might revisit the stock if it appeared the final fifth wave rally was in effect, and the recent breakout last week suggests that it is.

Assuming the fifth wave rally is on, the stock has displayed a consistent pattern since its 2003 lows in which the first wave tends to be extended (i.e., the longest of the three impulse waves).  If it retains that pattern, then probably the best highs would occur between 66 and 70.  The previous high at 65.11 should also serve up some resistance.  If the stock is in a fifth wave rally, and its corrective phase over, then it really should remain above 58 on any pullback from the current breakout.  You might want to set a stop just below that.  60 offers an opportunity for entry. 

For the option, you can consider the August 2007 $65 Call (symbol AHHM), currently selling for $4.20.  This is still obviously OTM, but with the Delta at 0.48, which shows decent pricing.  

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