PALM (Long)...

I must be feeling bullish this weekend because I'm putting out another long. This time, it's PALM. Am I late on this one? Yes, very. And we need to consider this in how we play the stock. PALM's up like 500% year-to-date, and 1,400% from its lows back in December. PALM doesn't report earnings again until sometime in mid or late September, so no worries there. As you can see, the stock has consistently held the middle BB line (green dashed line) throughout its long uptrend, save for one brief dip below it in May. However, at that time, it held the 50-day EMA (blue line).

There are a few ways to play PALM here. My plan is to take a small starter around current levels. From here, we have two possible scenarios. Either PALM powers its way even higher, or it continues to pull back. If PALM shows signs of holding that middle BB line and begins to power higher, I will look to add some in expectations of a breakout to new highs above $17. From there, we'll look to buy more on a pullback from the breakout.

However, if PALM fails to hold the middle BB line, which is likely because it has a gap-up from late June to fill down around $14, I would look to add a little more upon the filling of that gap. If that support level fails to hold, then we have the 50-day EMA right below it. This would be the final add point. If that 50-day EMA fails to hold, this stock is going way lower, and we're not going to sit through that (we may even get short at that point).

One thing to note with these two scenarios is variations in position size. Either way, my initial purchase will be small, but if we have the pullback continue, then my purchases will be smaller than they would be if we had the rally scenario. In this situation, we are using position size to mitigate risk, but because we don't know which scenario is going to unfold, that's why we're starting small.

So, why be willing to buy weakness here? This stock has a very strong uptrend and very powerful momentum to the upside, and the trend is your friend except for the bend at the end. With the way we're playing this position, we'll protect ourselves if we're at the end of the trend, but we'll also put ourselves in position to profit should the trend continue.



Position: none