Office Depot (ODP )
Update- February 26, 2007

We originally looked at ODP last June, and thought the stock should ultimately see a Wave (5) rally to new highs.  The Wave (4) correction, however, took about nine months to play out, with a brief fake out in October.  The current wave count suggests Wave (4) should finally be over, and if so, it offers a nice opportunity to position for Wave (5).

As the updated wave counts suggest, Wave (4) played out as a contracting triangle, which is the reason for the mostly sideways action.  The internal waves of the triangle are also nicely distributed in Fibonacci relationships, something that does argue for completion.  A contracting triangle, when complete, should see a sharp upside breakout, which we'd be looking for to further confirm the pattern.  If the Wave (5) interpretation is correct, a new high above the current 46.52 should be seen, with our projections still at 48 or 50, per the original WW.  I've noted the calculated Fibonacci resistance levels, and two key levels to watch out for are the 39 and 44 areas.  You could consider the 35 area for an entry, using 32 as an initial stoploss.

As a new option play, you might consider the October 2007 $35 Call (symbol ODPJG), currently pricing in at $3.90, with a nice Delta of 0.63.  

©Copyright 2007 Tony Carrion.  All content presented is the exclusive property of Market Harmonics. com, which is owned & operated by T. Carrion & Co., LLC, and may not be duplicated or distributed without the express written consent of the author.