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Reading PALM

01/05/09 12:31:15 PM
by Koos van der Merwe

Everyone knows PALM, Inc, the forerunner of mobile handheld computers. Then the company lost its way as competition excelled, but is it starting to find its direction again?

Security:   PALM
Position:   Accumulate

Palm, Inc. (PALM), is a provider of mobile products. It offers Treo and Centro smartphones, handheld computers and accessories through a network of wireless carriers, as well as retail and business outlets worldwide. The company sells mobile products in two product lines: smartphones and handheld computers. Its product lines provide a range of business productivity tools, and personal and entertainment applications designed for mobile professionals and business customers, as well as entry-level consumers. Its products run on the Palm system or Windows Mobile operating system (OS). All of its products incorporate instant-on, one-touch access to frequently used applications and nonvolatile flash memory that protects stored data even if the charge and power run out. Other features found in some of its products include wireless communication capabilities, such as Bluetooth and wireless fidelity (wi-fi), multimedia features, and a slot for stamp-sized expansion cards.
Etc etc etc. it sounds like Apple (AAPL) after Steve Jobs left the company, when Apple shares fell to the $5 range. Then Jobs came back. Is something similar going to happen to Palm?

Palm is scheduled to hold a press event on January 8 at the Consumer Electronics Show in Las Vegas, at which it is expected to debut its Nova smartphone operating system. Will this be the magic touch that brings the stock price back to new heights? Charts seem to think something is happening.

Figure 1 is a monthly chart of Palm. The price after its reverse stock split of 1 for 20 in 2002 at its height reached the unimaginable level of $1,684. (Before the split, the stock price plummeted from $100 per share at its March 2000 initial public offering to 65 cents on Wednesday, December 31, 2008. Directors mistakenly believed that the split would offset the decline in stock price associated with the planned separation of Palm's hardware and software businesses.) The chart shows a wave count with the price reaching a low of $1.14.

FIGURE 1: PALM, MONTHLY. Palm is showing the collapse of the stock price.
Graphic provided by: AdvancedGET.
However, a daily chart of Palm does show some optimism for this embattled stock. The chart suggests that the C-wave down is complete and that the price is now in a wave 2 down. However, the relative strength index (RSI) is still bullish, suggesting that there is a probability that wave 1 is not complete. This is why I have suggested a cup & handle pattern may have developed with a target of $6.34 for the end of wave 1 up and the start of wave 2 down.

FIGURE 2: PALM, DAILY. This stock suggests a coming recovery.
Graphic provided by: AdvancedGET.
Palm Inc. has presented a plausible chart suggesting a buy should the price move above $3.74. Should this happen, its immediate target is $6.34 (3.74 - 1.14 = 2.60 + 3.74 = 6.34). This is a stock to be watched.

Koos van der Merwe

Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.

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Date: 01/06/09Rank: 3Comment: 

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