Palm Gets A Grip
Palm’s sell-off right after its March
2 IPO was one of the warning shots ahead of the Nasdaq bear market. In a classic
sign of excess greed getting its comeuppance, shares in the maker of hand-held
electronic organizers opened at nearly four times the offer, peaked at 165, then
headed south. The stock finally bottomed at an intraday low of 19 7/8.
After meeting resistance around the
old offer through most of July and August, shares in Palm
(
PALM |
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PowerRating) have
managed to forge ahead, particularly impressive given the shaky fate of so many
other tech tech stocks this summer.
After Monday’s close, the
Palo Alto, Calif.-based company reported Sept. 1 Q1 operating net of 4 cents a
share vs. 2 cents a year ago and analyst estimates averaging 2 cents, according
to First Call/Thomson Financial. Sales barreled ahead $401.0 million from $176.5 million.
Earlier in the day,
wireless phone maker Motorola
(
MOT |
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PowerRating) said it would team up with Palm to
develop a new generation of "smart" phones. The phones, which will
carry both Palm and Motorola brand names will have larger color screens than now
on most wireless phones and will support GPRS, which enables continuous sending
and receiving of digital files and Web browsing.
This stock has earned a rest. I’d like
to see the stock consolidate gains, then look for a pivot for the
intermediate-term trade. Note the clear evidence of accumulation. Of the past
seven days when the stock traded noticeably above its average daily volume
(using a 50-day arithmetic mean), Palm traded up. These also were accumulation
days (defined as a gain in price coinciding with an increase in
trading volume over the prior session).
All stocks, of course, are risky. In
any new trade, reduce your risk by limiting your position size and setting a
protective price stop where you will sell your new buy or cover your short in
case the market turns against you. For an introduction to combining price stops
with position sizing, see my lesson,
Risky Business. For further treatment of these and related topics,
you’ll find a mother lode of lessons in the Money
Management area of TradingMarkets’ Stocks Education section.