Monday, July 12, 2010

RIMM Watch

Research in Motion Ltd. (RIMM), maker of "the other iPhone (tm)", is showing a cascade of bull signals on the fourth day of a rise from its July 6 swing low of $47.42. The 12% rise is the most impressive since RIMM began its long slide from the swing high of $74.94 in mid-March

RIMM $53.31

The signals: Person's Proprietary Signal (pps) led the way by switching to bull phase on Friday, followed by the macd and the fast stochastic today. The parabolic sar remains in bear mode.

The upward move does not yet qualify as an uptrend, a semantic distinction that I find serves as a brake on runaway expectations. The daily chart shows a series of higher highs and higher lows coming off the swing low, but there has not yet been a lower high and lower low, followed by a retrace up to still higher highs and lows.

In other words, to be an uptrend, you've got to have a failure of upward momentum that proves to be weaker than the previous failure, and then a post-failure resumption of the rise. This is an example in action of the old Japanese proverb: "To lose is to win".

RIMM announced earnings in June, so there are obvious "black swan" points between now and the mid-term horizon. The earnings were a negative surprise to traders (a black black swan, rather than the white black swans that fly in with happy surprises).

One possible reversal point in the rise is the mid-point of the ensuing downward gap, in line with the market lore that prices will tend to move up to that level to "fill in the gap". Like many pieces of market lore, this is an example of a Tinkerbell indicator: If enough traders believe it is true, then it will come true.

Reversal Levels

  • $62.91, +18.0%
  • $56.90, +6.7% (gap mid-point)
  • $53.81, +0.9% (today's high)
  • $53.31 <== You are here.
  • $47.42, -11.1% (swing low)

The Great Reflation: How Investors Can Profit From the New World of Money
OK. The credit bubble burst. Housing, burst. Shockwaves reverberated. Markets collapsed. What lies ahead as we reemerge from the wreckage.

Tim Bovee, Private Trader tracks the trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.


  • psar - Parabolic Stop and Reverse
  • adx - Average Directional Index
  • pps - Person's Proprietary Signal
  • ma20 - 20-day moving average
  • macd - Moving Average Convergence-Divergence
  • sto - Fast Stochastic

About the glance: The colors indicate the state of each signal.

  • trend: Determined by the 5-day moving average, green for up, red for down, yellow for sideways
  • adx: orange for above 30-up, blue for 20-down, purple for in the middle. Red is most prone to whipsaws
  • psar, pps, macd: green for bull mode, red for bear
  • sto: green for overbought, red for oversold, yellow for the neutral zone.

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