Doug:
IMO, the PALM revenues/earnings should support a PALM price of at least 32. At the distribution ration of 1.5 + 25 to 35 for COMS (depending on who you listen to), that translates into 73 to 83 for COMS come D-Day.
But the 1.5 ratio doesn't mean anything right now, since COMS:PALM is trading about 1.1. The 1.5:1 ratio rule that drove everything up from 50 to 120 is of no help right here, because (1) there is apparent uncertainty about when and if COMS shareholders will ever see PALM, and (2) there is uncertainty as to what valuation PALM can hold.
IMO, uncertainty (1) is stupid, but the market isn't listening to me. Also IMO, little will happen to remove (2) until we get out of the quiet period when PALM can start making a bunch of positive announcements, GS/MSDW/ML et al can start making glowing recommendations about the stock, and the Q3 earnings show PALM is going gangbusters (hopefully).
So "where from here?" was your Q. Well, there was some institutional support today at 75, and again at 72, but it was half hearted:
thomsoninvest.net
Most of the selling was by small investors (about 32 million shares on around 57,000 trades, about 570 shares/trade). We had irrational buying on the way up, now we have panic selling, both by people who got in the 50's and want to preserve some gains, and by people who bought well above this level and want to stop the bleeding. Keep in mind that we turned over the entire 350 million COMS float between 1/31 and IPO day, we may have to turn it over again before we get a significant move up. Start counting.
As usual, in retrospect, my own game plan was far from perfect. While I sold a significant chunk of everything pre-IPO, instead of dumping everything else on IPO day as soon as COMS rolled over, I held on to a lot of the stock because I thought PALM would hold about 60, and that the COMS:PALM ratio would pick up from the IPO level of 0.85 to around 1.25. It hasn't happened yet, and it may take a while. I was out until about 11:30 today, but I sold 50% of what I had left as soon as I got back and saw the institutional selling that took place this a.m. at 83-85, and I had a stop in at about 72 on the rest. All gone now. Should have put the damned stop in at 80 before going out.
From here at 69.5 COMS could recover and move higher, but IMO, it's more likely that it will sell off to around 60 (the 50 DMA) before we get a decent bounce back. Lots of support around 60 - remember the trouble we had getting above 60 on the way up? But it's broken through the 70 support so now you have to take the TA into account, since funds won't buy back in until the TA indicators turn, and the individual investors, having been burned once, won't either. Plus, the guys at the CBOE still intend to hang onto the huge premiums they collected on the March 75+ options, and if they can, render the March 65's and 70's worthless also. I think we'll see 60 before we see 80 again. At the very least, very murky waters until we get past the 3/17 options expiration, the 3/20 earnings, the PALM options/shorting possibilities around the same time, and the ending of the quiet period.
But this needs watching closely now. COMS could turn on a dime on positive news (like the IRS letter), since it's now undervalued, by about $10-15 by my reckoning. If it gets to 60, I'll definitely be back in, maybe with some long term options as well as stock. If it makes a strong and convincing move up on decent volume from any level, I'll get back in even without good news. This is definitely not a closed book by any means, and there'll be more opportunities to get some decent gains out of it.
Keep an eye on the HWP/A distribution and the action in A for a guide to the eventual COMS/PALM distribution dynamics. I've been watching HWP/A, but missed a major move in A for the third time because of focus on COMS. You get 0.36A for each HWP, which means right now you can get the HWP part of HWP for (145-0.36 x 152) = 90. Today's 50 point move in A should have moved HWP 18, only moved 8.
Sorry for the long reply, just thinking out loud on paper. Helps sometimes.
David T. |
