Today's Wall Street Journal article in the Personal Tech column notes that Handpring's (NASDAQ:HAND) $2.04 +0.09% new push email service for the Treo (released 10 days ago) means that the Treo can "replace a separate phone and PDA--- and a BlackBerry as well;" when it becomes available on Sprint's forthcoming high- speed network this summer, it will provide a nearly always-on experience for downloading email, much like Research in Motion's (NASDAQ:RIMM) $16.60 -0.95% BlackBerry.
This information has me looking at both stocks to see what the MARKET thinks of things and has me wondering if Handspring's (HAND) Treo can give Research in Motion's (RIM) BlackBerry a run for its money.
Handspring Chart - $0.25 and $0.50 box
Once a "high flier" HAND traded as high as $99.31. Since that time, the stock's well has run dry. The company now looks to its new Treo to stimulate revenue growth and give Research in Motion's (RIMM) popular BlackBerry a run for consumer's money. So far, there's been little bullish response from the market. Some feel these PDA's are simply a commodity item with little pricing leverage.
Research in Motion Chart -$0.50 and $1 box
RIMM's point and figure has some of the same types of bearish supply/demand characteristic as we found in HAND's chart, but may be lagging the move lower, thus a potential bearish put play. The vertical count currently hints at $8.00, which is about 50% below the current trading levels. I like a bearish trade in the RIMM December $15 puts (RULXC) and target the $8.00 by expiration. No stop on the puts.
A good trading strategy would be to establish 1/2 position here, then add to full on a trade at $15, which would be a triple- bottom sell signal. According to Professor Davis' study, that pattern is profitable for a bearish trader 93.5% of the time, for an average gain of 23% in 3.4 months on average. A trader can "back test" that with the triple-bottom sell signal back in August (red 8) at $21. The stock eventually found buyers at the $14 level, marking a 33% decline in just about 1 month.
A stock trader can follow a similar trading strategy in the underlying stock. Shorting 1/2 position at current levels, placing a trailing stop just above the $19 level. Then should the stock trade $15 and give the triple-bottom, round out to a full position. As time progresses and should the trade work in the favor of a bear, slowly cinch down trailing stops or take profits as needed.
Trader's short/put RIMM can also monitor against HAND to get a feel for potential competition or dynamics taking place in this type of technology.