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Sentiment Snapshot: Palm, Inc. (PALM)

Put players target Palm, as the smartphone maker challenges near-term resistance

by Andrea Kramer (akramer@sir-inc.com) 3/10/2009 3:03 PM

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Despite the shares of Palm, Inc. (PALM: sentiment, chart, options) advancing in the wake of smartphone-related news, options traders are scooping up puts on the tech titan. So far today, the equity has seen roughly 10,000 puts change hands � more than tripling its average intraday volume of fewer than 2,850 contracts.

Most speculators are looking ahead to the back-month series of options, with the stock's May 5 put the most active. This position has seen about 5,300 contracts cross the tape, exceeding the March 7.50 put (which has seen volume of almost 2,000 contracts) for today's most popular position. Meanwhile, the equity's May 7.50 put has seen about 1,400 contracts change hands, while its August 7.50 put has seen intraday volume of roughly 1,200 contracts.

So far today, the shares of PALM have added about 75 cents, or 12.5%, thanks to the company's announcement that it would receive $83.9 million through an expanded public stock offering. The firm will now offer around 23.125 million shares of common stock at $6 each, in an effort to help cover the costs of launching the Pre smartphone. Plus, the California-based company will resell about 18.5 million common shares that were part of a $100 million investment from private-equity firm Elevation Partners. Palm will then receive all net proceeds in excess of the original $49 million Elevation invested in January.

The Palm Pre � a touch-screen device similar to Apple's (AAPL) iPhone � is expected to debut during the first half of 2009. According to consulting firm Altman Vilandrie & Co., Palm will need to drop about $50 million to $75 million to prepare the phones, on top of about $50 million for marketing costs, the Wall Street Journal reported.

Technically speaking, today's trek into the black has PALM challenging near-term resistance from its 10-day moving average. This trendline � currently dawdling in the 7 neighborhood � has capped the security's rally attempts since mid-February. A defeat of short-term resistance here could spark additional buying pressure on the equity.

Daily chart of PALM since February 2009 with 10-day moving average

As Jocelynn Drake noted last week, most analysts are leery of PALM. The stock currently harbors only 3 "buy" or better ratings, Zacks reports, compared to 11 tepid "holds" and 2 "strong sells." Plus, Thomson Reuters pegs the average 12-month price target on the stock at $7.81 � less than a point from PALM's intraday high today.

Should the company's funding-related announcement help to reassure the skeptics, a fresh round of upgrades and/or price-target boosts could help the shares extend today's rally.

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Sentiment Snapshot: Palm, Inc. (PALM)

Put players target Palm, as the smartphone maker challenges near-term resistance

by Andrea Kramer (akramer@sir-inc.com) 3/10/2009 3:03 PM

PALM

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