Once the king of the handheld device market, Palm Inc. has had to fight an uphill battle against both RIMM and AAPL to regain a foothold in the smartphone market. But, as the saying goes, “if you can’t beat them, join them.” Palm is slated to release its own entry into the touch-screen market later this year, along with a slick new mobile operating system. The move has prompted questions of legal action from Apple, as the new Palm Pre, with webOS, performs remarkably similar to Apple’s iPhone. Still, the Pre revelation has inspired PALM investors, and the shares are making a comeback.
Technically speaking, PALM has rocketed more than 255% higher in 2009, enjoying near flawless support from its rising 10-week moving average. Furthermore, the equity has not closed a session below its 10-day and 20-day moving averages since March 9. The stock met with a spot of technical resistance near the 12 level on May 7, but the pullback was halted by support at PALM’s rising 10-day moving average. Additional support lies just below the shares at the 10.50 level - an area that recently provided short-term resistance. A rebound from this solid support should help propel PALM steadily higher.
Options traders have capitalized on PALM’s strong price action, sending the stock’s SOIR to a reading of 0.85, in the 40th percentile of its annual range. What’s more, the ISE/CBOE 10-day call/put ratio has swelled to a hefty 5.71, as calls bought to open more than quintupled puts purchased during the prior two weeks. From a contrarian perspective, this wealth of bullish sentiment is par for the course for this outperforming equity.
Not everyone is quite so optimistic toward PALM, however. Short interest still accounts for a whopping 34% of the stock’s total float, despite an 8.8% decline in the number of PALM shares sold short during the most recent reporting period. As the shares continue to defy gravity, more of these bears could be forced into buying back their positions, thus prolonging the stock’s rally. Finally, Wall Street analysts have yet to jump on the PALM bandwagon. According to Zacks, 13 of the 17 brokerage firms following the shares rate them a “hold” or worse. Any upgrades from this bearish bunch could provide additional buying support for the security.
