[Intuitive Pick] Palm before earnings

I don’t believe in Palm reading. But here’s what I came up looking up PALM ahead of their earnings…
So what do we got?

• A stock hated by everyone. No one is really interested in this stock. On balance volume is crashing, and MACD is stuck at 0. We could be in for a influx of buyers. I would like to see RSI at a lower extreme.
• I marked some pivot points on the right side of the chart. They are pretty wide: $16.00, $19, and $23.
• An observation that amazes me is how boring PALM has been in the midst of this tech rally. The Nasdaq has brought up many semiconductor, software, and tech hardware stocks up to at least something close to their May highs. Except PALM! If Palm were to follow the script, it should be trading closer to $20 by now, perhaps above it.
• … meanwhile, Palm’s competitor, Research in Motion (RIMM) has followed the script quite well. RIMM is rallying a cool $20 since August lows of $65 up to $85!
• Stock is heavily shorted, with something near 16% of float.

A second chance? Maybe. I’m not sure. The stock is already down from a earnings warning issued on September 6. I hate it when they do that- it messes up the conference call volatility. That single action could completely nullify this trade, so don’t ignore it.

The Trade: I see a good opportunity to play a stranggle. The October 17.50 call, and the 12.50 put looks most likely to double, or even triple. A more conservative approach would be the January 08 @ 20. That seems like an easy double w/n a year.

There has been unusual and heavy PUT option buying on the Consumer Discretionary SPDR etf (XLY) for the month of October. How do we read this? Are institutions betting against the market in expectation of a pull back, or are they hedging their heavy long positions in this market rally? Also note the open interest at the 35 strike. I guess not many believe the rally is strong enough to breakout over $35.

Then again, many economist are confused about the current fall in consumer spending while XLY (which generally represents a good portion of the country’s consumer spending) is at a 52-week high. These two should move in parallel. It seems then that the heavy PUT buying is a bet that this paradox will unravel and the market will rebalance.

It’s a battle between the bears versus the bulls. I have a lot of key pivot points in the major indexes that will be challenged tomorrow. I’d post some charts, but I’m lazy. For now, check them out yourself:

• The Dow is sitting on 11,540. I have 11,500 as a sell of point and 11,600 as a breakout point. It’s a dead draw for now!
• Nasdaq bounced off the 2200 point today and recovered nicely. Nasdaq will live and die with the SOX.
• S&P remains close to the famous 1320 point.
• SOX is way overbought and now 40 points above the 50-day moving average(429.00), and 10 points away from the 200-day moving average (481.00). Notice how the SOX could not break 470.

Case for the bulls:

• Oil is below $70 still
• Housing market soft landing
• CPI and PPI data shows inflation to be tamed
• the 1 month trend is up
• Gaining in on May high (that’s where I got 11.6K for Dow… could be good or bad)
• Retail and homebuilders rebound
• Investor confidence rising
• Oracle up big after hours

Case for the bears:

• Yahoo bringing down .com stocks (also see Google’s performance today)
• SOX still overbought, thanks to FSL offer
• Big resistance points above
• Cramer says oil heading much lower, and techs much higher (contrarian indicator)
• Finger on the profit taking trigger (ie, dangerous to go long here)

… who will fold first? Probably me. I’m beginning to believe this rally. Anyway, tomorrow’s Fed statement will be the true verdict.

[These animated music videos (AMVs) crack me up. Anyway, here’s one of Mr. Brightside… one of the best songs ever. No, Im’ not an anime freak!]

What a day. Market was clearly heading down south with all types of bad news on the headlines. Then buy-the-dippers took over and brought the market back up. Not a good sign for the bears out there (including me). It was definitely one of the trickiest days to trade, in fact, I don’t think I’ve ever posted so much on my day trades page. Anyway I have one last trump card to play- that would be tomorrow’s Fed statement. With PPI data inflation friendly, I’m not to sure if this trump card is strong enough to take down the bulls. We are overall overbought in the short term, but you can pretty much ignore those indicators when the market is rallying strong.

After today’s volatility, I now have a new important short term point in the Dow: 11,500. Anything below that means trouble. I’m also still watching 11,600 as a key resistance point.

Stock Notes

• YHOO brought down everyone. Especially EBAY, TZOO, HHH, AMZN (anything w/ a .com).
• GROW is mixed. Started off strong, then panic sold, then corrected. Textbook.
• ATHR – pumped by Cramer, and therefore withstood the minor tech sell off today. I’m too afraid to short since a lot of idiots will be driving the price up.
• VLO – almost bought, but decided to ignore until we ge proof of life.
• AKAM – pretty strong stock
• RACK – shorted today. Signs of a pullback.
• ERTS– shorted this too, ahead of Fed Statement
• UARM – one hot stock. Doing very well now that football season started. Coincidence?
• SNDK– I said: “when Sandisk is read, market is dead.” Well, when SNDK started to head for the green, it was time to cover.
• RFIL – stock is easily manipulated. The “ask” was being thrown around everywhere, sometimes over 20 cents more than the bid! Crazy longs, you make me sick.
• IMCL – bounced back a little after selling off from patent news.
• HANS – short squeeze in effect.
• SONS – adding this to the “go long” watch list
• SIRF – covered today. Swapped out for a short in RACK.
• MNST – covered today. Stock broke down early in the day, then it just headed south. I think the stock has a long way to go down, but today’s drop was begging for a cover. I’ll re-short on a bounce.

Market is mixed ahead of tomorrow’s Fed news. CPI data is inflation friendly, but stocks are down.

Stock Watch

NVEC (falls back down… crap)
HANS
TIE
FNET
GROW (on fire)
MNST (seems to have broken down)
ANGN (bounces)
NAPS (extends rally)
RFIL
CTIC (falls on price offering)
IMCL (falls on patent ruling)
FSL (profit taking and falling volume(

Market is a little choppy ahead of Wednesday’s Fed update. I spent the day shorting ANGN. I knew the stock was weak, but I didn’t know it would fall this hard. I covered to early. Whatever.

• NVDA– covered today. Longs are strong.
• KNOT – covered today since it filled the gap back up.
• SNDK – created a top near $61, then just collapsed with the market.
• TIE – continues the bounce from last week.
• VLO – up over $2. Shoot. Oil is went up today.
• NVEC – covered today. Crazy stock.
• HANS – stock heads back below $30 in my book
• FNET – resistance formed at $13
• FSL – brought the SOX up again. I think they get shot down tomorrow or Wednesdasy.