A Quick Downside Play

GRMN Looks Priced to Perfection

By Bryan Bottarelli
Thursday, July 27, 2006 12:27 PM EST
Thu, 27 Jul 2006 17:27:00 GMT

Dear Bottarelli Research Member,

In an effort to balance out our current ledger, I have one final trade to make — a downside puts play on Garmin (GRMN – NASDAQ). As you can see by the chart, the maker of navigational systems has just broke below its 50-day moving average on the heels of their Wednesday, August 2nd earnings announcement.

GRMN

Combine this breakdown with the fact that GRMN insiders have made one (1) purchase of 50 shares versus 250 sales of 1,055,150 shares in the last six months, and I have a feeling that GRMN insiders think stock is priced to perfection.

Case in point, Chief Executive Officer Min Kao just sold 257,100 shares on July 5th for $26,760,000. Then on June 2nd, Director Donald Eller sold 100,000 shares for $9,700,000. With heavy insider selling and a 50-day MA breakdown leading onto next week’s earnings announcement, it looks like GRNM could move down to $85 before finding the next support level. So let’s capitalize on this move using GRMN August 90 Puts (GQR TR).

PLAY: Buy the GRMN August 90 Puts (GQR TR) at or under $4.90, good for the day. Current bid/ask spread is $4.60 to $4.70. Place a protective stop loss at $3.00.

Lock and load

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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