Garmin Ltd. (GRMN)
(10/10/07)

I was originally considering GRMN as a possible short play (and might still if it were to take out 95 in a pullback).  However, the recovery from its pullback of Sept. 28-Oct. 3 has been pretty strongly impulsive, and the decline itself is countable as the final leg of a running flat fourth wave.  If so, then it leaves room for a final fifth wave rally, that would promise to be volatile, probably fast and good for quick upside.  Depending on what happens after that, we might then go the other way.

The 112 area is .618 resistance, and the stock retraced it in just a few days.  However, the Put/Call ratio isn't pointing to extremes just yet.  More likely is that the rally is a first wave pattern within Wave 5.  We could thus see the stock pullback a little sharper than it did yesterday, with support at the 109-108 area.  We'd want to see the 112 area thoroughly removed as resistance, and suggest a break through 113 before committing.   There's a huge opening gap that should likely get filled, with resistance levels at 116.70 and 119.60.  If it gets through this then it should confirm the wave count.  Assuming a fifth wave, then it should retest the 122.78 high of September.  Highs between 124-126 would be projected, with further potential to 133 if successful.  If successful in attaining 113, then 110 can be used as a stoploss. For now, we'd only consider reversing course if an impulsive sell-off pattern developed (always a possibility) and it looked like 95 could be taken out.  

The only practical short-term options are November and January.  The January 2008 $125 Call (symbol RZJAE) is currently pricing in at $8.40.   The Delta on the option is 0.43, which is a bit low since it's OTM, but there's enough implied volatility in the pricing that the contract range today was over $1.00, so it can still move. 

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