Palm (PALM)
(12/20/07)

PALM got beat up severely back on October 24 following a slew of analyst downgrades.  The huge decline that followed brought it back to nearly retesting its low of 2003.  The stock has gotten extremely oversold technically, and market sentiment based on Put/Call action got rather bearish.   With the stock starting to recede from triple digit readings, and an apparent technical being made, we think PALM should minimally experience a recovery bounce.  The stock reached an intraday low of 5.24 on Dec. 19, so ideally we will be getting in close to the ground floor.

Other than the initial rise being an impulse pattern, it's still too early to be certain how exactly the recovery will unfold, and the depth of the retracement to follow.  The resistance levels I've drawn represent various Fibonacci retracements of between 14.6% to 50%.  The .382 retracement comes in 10.58, which would be most characteristic even for a simple 3-wave bounce.  There is some intervening resistance at 7.28 and 8.54.  These retracements depend on 5.24 having provided the correction low, for which there is both Elliott Wave and technical evidence.  To limit risk, you may want to use a stop at 5.00 until the resistance level at 7.28 can be successfully penetrated.

Options are ridiculously well priced, so if our forecast works out, the option should pay out nicely.  Our suggestion is the May 2008 $5.00 Call (symbol UPYEA), currently selling for $1.75 with the Delta at a nice high 0.76.  

©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.