RIMM: Research In Commotion

(Click on charts to enlarge, then click again for further enlargement. Use back arrow to return to narrative).

If we start at the left of the chart, back in September, RIMM's Ichimoku chart tells an interesting story. Notes on a number of moves are on the chart. Look how RIMM was positioned at the far right, immediately ahead of the release of earnings. Charts can't tell us with certitude how a stock will react to news, like earnings, analysts' upgrades and downgrades, etc., but they can help us to determine how we want to respond to these events.



At least two analysts upgraded RIMM in the month ahead of earnings. RIMM got a nice pop to the upside when BMO Capital raised it to $110 on March 3, but then RIMM had to go back to trading on its on merits, as it were. I think we can agree that, prior to the release of earnings, RIMM looked pretty vulnerable, poised to break this H&S Top if they didn't come up with the goods at earnings.



When a stock looks as vulnerable as RIMM did here, when it gaps down, it often is a gap down below A LOT of support. In this case, RIMM gapped down below ALL support, going back to late November. That was one of those "Gap Down...Take No Prisoners...This is Just For Openers" openings that we've discussed in the past. Players hoping for a rally at least back to the broken neckline so that they can sell into the snapback rally tend not to get it, at least not immediately. Everyone who bought RIMM between late November and March earnings is trapped in the stock with a loss.

Could we have KNOWN that this was going to happen? No. Did we have a real good idea that it might be wise at least to take "something" off the table ahead of earnings?