Internet HOLDRS (AMEX: HHH) Takes a Hit

May 6, 2008

Shares of the Internet HOLDRS (AMEX: HHH) ETF sold off Monday, May 5, on news that Microsoft Corp (NASDAQ: MSFT) was withdrawing its bid for Yahoo! Inc (NASDAQ: YHOO).

Not to get into the deal between these two internet powerhouses, but Internet HOLDRS declined, intra-day, to $54.16 a share. This may be about as low as it will go, setting up a potential buy for this actively traded ETF.

$53.35 is the 61.8% retracement for the March 17 to May 2 run-up in share prices, while $53.35 is also the 50% retracement for the entire February 1 to May 2 advance, from the panic lows on January 23 and January 31. This means there are intersecting support levels for Internet HOLDRS just below Monday’s lows.

It is unlikely prices will decline lower than $53.35 without a reversal. Monday’s intra-day lows may have come close enough to be the final lows. If Internet HOLDRS rallies on Tuesday, look for higher highs in coming weeks.

The Fibtimer.com (http://www.fibtimer.com) ETF Timing Strategy has a position in Internet HOLDRS.