Research In Motion facing a flex point September 16, 2010

Sep 13th, 2010 – Comment

For my money the downside risk outweighs the upside potential and as I have learned over the course of a lifetime as an investor and entrepreneur – protect the downside – the upside will take care of itself.


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Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.


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RIM

 

Hi Lou

What do you think about RIM?

Wayne

 

Hi Wayne,

I have gotten a lot of email since I posted on Research in Motion ( RIM TSX) on August 09, 2010 for Kurban. It looks like investors are seeking an entry point for this iconic name.  At the time  RIM was struggling and needed  to hold on to support at $50.00. Since that time it has melted through $50.00 and given that its scheduled to report its quarterly results on Thursday September 16 , 2010 we need to continue  being  cautious. The earnings per share  estimate for RIM’s Q2 2011 is $1.40.

With the flex point scheduled for Thursday let’s consult the charts and see if we have an opportunity leading up to the report.

rim4

The three year chart illustrates the break below the $50.00 support level and validates my analysis of August 9, 2010 that investors would be best served keeping their powder dry. Here’s the rub on RIM. If it doesn’t hold the $47.50 level it has very little support till we hit $35.00.

 

 

 

rim5

The six month chart tells the story of a stock struggling with increased competition from other mobile device makes such as Apple Inc ( AAPL NASDAQ) with its IPhone and other makers making inroads in the smart phone space using Android software from Google Inc.( GOOG NASDAQ).

 

You can see the stock moved up after August 9, but met resistance on the 50 day moving average and headed south with a vengeance to its current trading range. On Friday September 10, 2010 news hit the wires that JP Morgan was testing the IPhone for its corporate system putting more pressure on the stock.

At this point getting in before the release of Q2 would only be recommended for an experienced trader who has a high tolerance for risk. Yes the MACD seems to be making a move higher, and the RSI is bordering oversold territory. But there is a flex point only three days off.

As mentioned in other posts, a flex point involves a known event with a set date that investors need to be aware of.  In this case the event is the release of Q2 2010 financial data. The question that has to be answered is will the results break RIM out of the current downtrend? Watch the indicators on Tuesday and Wednesday and see if the stock moves higher ahead of the news.

For my money the downside risk outweighs the upside potential and as I have learned over the course of a lifetime as an investor and entrepreneur – protect the downside – the upside will take care of itself.

Happy Capitalism!

Categories: Telecommunications
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