Well Lou, is it time to take a look at RIMM…..I’m thinking a double bottom could start to form over the next few months….or should we start slow dollar cost buying.

Jay

Hi Jay,

This will be the sixth time that I have run the charts on Research in Motion Limited (RIMM NASDAQ). The first time I looked at the stock was on August 9, 2010 for Kurban.

The shares were trading at $54.93 and it was advised that the company was playing catch up with the competition and that the stock was in a downtrend that started in 2009. It was also cautioned that anticipating a bottom can result in the unkindest cut of all, finding new lows with personal cash. Unfortunately that was precisely the right call.

The last time I examined the case for RIMM was on October 21, 2011 on an assignment from Bob. The shares were selling for $22.61 and the analysis suggested that the stock was neither a buy nor a hold. Again the right call but no less painful for investors who continued to hold.

Let’s take another run at the charts and see if the worse is behind RIMM.

The three year chart is one of those rides that make me nauseous just looking at it. When you are holding a stock in a free fall you have to gird your loins and sell.

The downtrend that started in March of 2011 is still in place as is the death cross that formed in May. Clearly there have been plenty of opportunities to sell and preserve capital.

You asked if a double bottom could form in a few months. It is possible but I would want to see it and not anticipate it. The failure to hold support at $20.00 is a real concern.

The six month chart illustrates the bounce off of the December 20th low of $12.45. Most of the advance was fuelled by takeover rumours. When the management changes were announced January 23, 2012 it did nothing for the stock.

At this point I have to maintain my stance that the risks outweigh the opportunity. Until we get a double bottom or some other indicator that the selling has abated and buyers want to own RIMM I would not be stepping into the fray.

Confirm the bottom, don’t anticipate it.

Make it a profitable day and happy capitalism!

Hi Lou,
Can you shed some light on TRI? Ever since they announced the Reuters acquisition the stock has struggled. I own it and want to exit, but it is in registered and has no tax loss efficiency. It also has a low beta. Help!

I was thinking of gradually switching it into a higher beta name like Cameco, which is down about the same amount. Would this be too risky?

Harry

Hey Harry,

Thanks for the assignment.  When Thomson Reuters Corp.(TRI TSX) was formed some four years ago when they merged there was lots of promise. Unfortunately the deal got done at a market top and the competition stepped up to the challenge presented by the new behemoth.

In 2007 TRI controlled 36 % of the desktops using financial data systems while Bloomberg had a 25% share of market. Today the two are running neck a neck with TRI at 31.4% and Bloomberg 30.8%. Not quite the outcome everyone in management of the merged organizations had anticipated.

An examination of the charts will provide better insight into how you might proceed.

The three year chart depicts a stock that came off a rock hard bottom and had a great ride from March of 2009 until March of 2011. But the advance stalled and it has been a trail of tears for investors who failed to realize that the good times were over.

The first sign of trouble surfaced in May of 2011 when the uptrend line was breached. The second sign that it would have been prudent to book some profits was when the death cross formed in June. Finally when the stock failed to hold support at $37.00 there was nothing left but the crying.

The  MACD and RSI on the six month chart both signalled weakness in mid November of 2011 when the shares sold off from $30.00 down to $27.00.  Currently there is support at $27.00 and the MACD and RSI look to be turning up.

With new management set to be taking over in the new year and a reorganization designed to speed up decision making it would be worth waiting before selling. In addition the dividend yield is 4.6% which is very attractive in today’s environment.

As far a selling TRI to buy Cameco these are two totally different businesses with completely different risk profiles. One is in the business of providing information to professionals the other takes on the risk of developing uranium deposits. I am not sure there is a valid comparison that can be made.

Make it a profitable day and happy capitalism!

Hi Lou,

I wonder if Yellow Media will bounce up and down a little bit or is it dead in the water.

I got cute a couple of years ago trying to make a few bucks with Can West Global. I don’t think this is as bad?

Michael

Hi Michael,

I have covered Yellow Media Inc. ( YLO TSX) multiple times for readers. The first post was on  June 12 of 2009 , the last was June 06, 2011 on a request from Andre when the stock was trading for $3.82. Over the last two years it was advised that the printed directory business was a sunset activity and that the transition to a digital strategy had execution risk. In addition it was clear that chasing the dividend could lead to trouble.

In July of 2011 I was contacted by an old friend of mine who is a seasoned investor and a contrarian by nature. He told me that he was loading up on YLO because in his view the street had it wrong and the stock was oversold.  That caused me to re- examine the factors involved but I still didn’t see a reason for a change in my analysis. The trend was down and the momentum indicators were not suggesting a reversal

Let’s examine the charts and see what might be in the cards for the company.

The three year chart is a classic example of a stock you do not want to own. A vicious downtrend with a death cross in place is not where I generally look to invest long. I can only imagine how happy the shorts has been with this stock. If you want the blow by blow story on how YLO destroyed so much value read the October 27, 2011 article in ROB Magazine by Susan Krashinky titled “How did Yellow Media stock go from $17 to 17 cents?

What is apparent is the bounce off the rock hard bottom at $0.12 in late September after the company announced it would halt paying a dividend and would  take a $2.9 billion charge. The October advance stalled when it hit resistance along the 50 day moving average.

The six month chart provides a close- up of this debacle. I have to suspect that the buying that came into YLO in October had to be short covering. What you want to keep in mind is that the company will report Q3 results on November 3, 2011.

I wouldn’t be chasing this stock. Management has proven itself prone to overly optimistic thinking despite the dismal facts before them. The best time to buy a stock is when it is going up.

Make it a profitable day and happy capitalism!

Hi Lou,

I am getting so many mixed signals from various “experts” can you give me your valued opinion whether RIM is a “buy, hold or sell”.

You rock on Oakley’s AM640 morning show. How about also becoming a contributor on humbleandfredradio.com’s internet radio station that launched on Oct. 15.!!!

Cheers

Bob

Hey Bob,

Thanks for listening to the John Oakley Show on AM640. Humble Howard and I are lifelong friends and I support his pioneering efforts in the exploitation of internet radio.

This will be the fifth time that I review the prospects for Research In Motion Ltd. ( RIM TSX) since August 9, 2010. Time and again two factors weighed on my analysis. The first is the established downtrend that has plagued the stock. The other is the crushing competition that has been hurting their prospects in the smart phone and tablet markets. The lame corporate response to their recent network shut down speaks for itself.

Lets examine the charts for a better understanding  of the potential for RIM.

The three year chart says it all.  An entrenched downtrend and a death cross that surfaced in May of 2011 when the shares were trading at $50.00. Once the shares breached the long term support at $50.00 it was a time to get out of Dodge and head for the hills.

 The six month chart is another leaf from the top of the ugly tree. The shares are trying to hold onto support in the $22.00 range but there isn’t much good news coming from the momentum indicators. Both the RSI and MACD are signalling continued selling.

At this point the best you can hope for is to maintain support at these levels. Beyond that its a crap shoot. For my money RIM is not a buy and there is scant argument for a hold. Make sure to put December 15, 2011 on your calendar. The company is scheduled to report Q3 on that day and those results will speak volumes.

Technology companies enjoy a period of strength as we approach the holiday sales season. Watch how RIM performs up to December 15 to see if it is following or lagging the group.

Make it a profitable day and happy capitalism!

Hello Lou,
Could you be kindly commend on Micromet Inc. (NASDAQ:MITI).
Your suggestion is the most appreciated.
Best Regards,

Binh

Hi Binh,

Thanks for the assignment. Micromet Inc. ( MITI NASDAQ) has had some positive news in the last few weeks. The development deal with Amgen Inc. ( AMGN NASDAQ) could potentially be worth close to $1 billion in payments dependent on reaching certain milestones in the lab.

The rub with any early stage biotech or pharmaceutical company is that they don’t have a product in the market. All of their efforts at the lab bench are very expensive.The way that they pay the bills is by partnering with a bigger company that has the financial strength to fund the development. If you look at the last eight quarters reported by the company they have lost money consistently.

 In the case of MITI’s deal with Amgen the agreement covers the advancement  of their BiTE platform in the treatment of solid tumors. BiTE mobilizes T- Cells in the human body to attack and destroy cancer cells. The potential reward is huge but the road is long and not without risk. The company currently has two Phase I trials  and a Phase II trial in progress. That’s a long way from approval of a compound for sale.

Examination of the charts will provide some guidance as to the future prospects for this stock.

The three year chart outlines the struggle that the shares have  had with  resistance along the 200 day moving average since January of 2011. Twice the stock failed to get through the barrier even on the Amgen news reported July 11, 2011.

The six month chart fails to provide evidence of an advance developing. The MACD and RSI are both indicating a continuation of the selling that started in mid July. Currently the stock is testing support along the 50 day moving average where we would like to see it hold.

What is evident from the charts is that MITI is not a buy and hold stock. There is enough volume on a daily basis to trade it efficiently. If we look at the MACD it signaled a buy in late March and a sell in late April for a 50% gain top to bottom. There was also another buy indicated in mid June.

A few of more things to have on your radar. In the last thirty sessions the shares only traded above the average daily volume over the last three months six times. Three of them clustered around the Amgen announcement. If we are going to get a sustained advance we need to see a healthy increase in volume.

The company is scheduled to report Q2 results on August 04, 2011. I would expect that they will report another loss but that isn’t an excuse to ignore it. Finally biotech stocks enjoy a period of seasonal strength from late June to mid September.

If you like the story follow the charts daily and watch the indicators for buy and sell signals. The name of the game with this one is to find the trades that will increase your wealth.

Hi Lou,

You do a great job. If you ever get a chance to comment on Intertainment Media (INT) I would appreciate it.

Your commentary is always so thorough.

Thank you
Carl

Hi Carl,

Intertainment Media Inc. ( INT TSXV) has  four operating divisions. Ortsbo.com is their language translation platform which has gotten some media attention due to live demonstrations they have produced with Gene Simmons and Paul Stanley of Kiss fame and Canadian NBA All Star Steve Nash. They also have itiBiti a private label social media platform designed for global brands, plus Ad Taffy a technology that creates an instant call to action for online advertisers.The fourth unit is  Magnum Printing which  provides fine printing services.

What is observable is that the volume on the stock has thinned out considerably over the last month. The average daily volume over the last three months has been 11.9 million shares. Over the last thirty days the volume has exceeded the average on only seven days and only twice in the last twenty three days. We must have volume if we expect a stock to move higher

The charts will provide some guidance on what might be in store for this ambitious micro cap.

The three year chart illustrates the excitement that came into the stock in 2011. Prior to this year the shares were essentially flat but interest in Ortsbo.com helped move the stock to $0.50 by the end of January. In early February the company reported an offer from a U.S. based private equity firm to take Ortsbo.com public as a separate company. The news sent the stock on a quick run to $1.00

The RSI and MACD both signalled that the stock was overbought at those levels and it subsequently pulled back to just below $0.50 by mid March. The shares then made another advance taking it to a spike high near $3.25. in mid April. Once again the momentum indicators signalled that the stock was overbought and selling pressure came into the market taking it to its current level of $0.65.

The six month chart provides a closeup of  the action in INT since February. At this point the best case scenario would be for the stock to build a base at these levels.Currently there are no signals suggesting  that the stock will move higher If it breaks below these levels there is support at $0.50.

INT provides another example of taking profits when they are available. A stock that runs from a low of $0.125 to $3.25 in less than five months has done some heavy lifting. The question that needs to be answered is can it move the bar again?

Make it a profitable day and Happy Capitalism!

VMW – VMware

Susan

Hi Susan,

VMware Inc. (VMW NYSE) has been on the move since it recovered from the late 2008 lows where it traded below $20.00. Some of the recent advance has been fueled by the company’s exposure to the excitement surrounding cloud computing.

The last time I ran the charts for VMW was in April of 2010 in a special feature for globeinvestor.com. Back then it looked like the shares might pull back but that the advance still had legs. After testing support on the 50 day moving average the uptrend continued. Here’s a link to the analysis from last year.

http://www.theglobeandmail.com/globe-investor/e-zines/trade-by-numbers/three-technology-picks-to-light-your-way/article1525265/print/

Lets review the charts to get a new perspective on the stock.

The three year chart delineates the sweet run that VMW has enjoyed from the late 2008 lows. The continuous test of support along the 50 day moving average signalled that investors were willing to buy on the dips and take the stock higher.

The advance  through 2009 and 2010 was supported by earnings that beat the street three out of four quarters for the period Q3 2009 to Q3 2010. However that streak was broken in January of 2011 when Q4 earnings missed forecast.

The next quarterly report for Q2 2011 is scheduled to be released on July 19, 2011. Make sure to put that date on you action calendar.

The six month chart provides a close up of the selling that came into the stock in January of 2011 ahead of  Q4 earnings which missed the forecast. Which is another example of guys in the know, knowing what to watch. The RSI and MACD both signalled a change in momentum to the downside as the shares breached the uptrend line. The pull back took the stock from $97.50 to $75.00 by mid March. A contraction of 23.07%.

VMW did recover from the mid March lows but once again met resistance at $97.50. Currently the shares seem to be range bound with resistance at $97.50 and support at $92.50. Neither of the indicators are suggesting a break out of the range. The next flex point we know of is the release of Q2 in July, until then its a game of wait and see.

Make it a profitable day and Happy Capitalism!

Je voudrais savoir YLO que vas t’il faire durant les prochains mois et durant l’année merci pour la réponse

Andre

Bonjour Andre,

I first posted on what is now Yellow Media Inc. (YLO TSX) on June 12, 2009 when it was still an income trust. At the time it was noted that the market for the directory business had to be called into question. Since then I have examined the case twice and both times it didn’t seem to offer great prospects. The last analysis on February 25, 2011 outlined that the shares were testing support at $5.50 and could challenge $5.00. Subsequently it melted through $5.00 and has been trading below $4.00.

Lets study the charts and see if there is a bottom developing.

The three year chart tells the tale of what happens to a stock that fails to hold onto a long term support level. For YLO support at $5.00 was its life line. Once that was breached the stock had no support until the $3.75 level, and not much there either.

The six month chart paints an ugly portrait for investors that were enticed to chase the dividend. On February 25, 2011 the yield was 11%. Currently the yield is 17%, which looks unsustainable.

The stock is clearly in a downtrend and moves to the upside in March, April, and May have met with resistance and failed to reverse the trend. There have been efforts to reassure investors by management, debt ratings agencies and analysts that cover the company, but all those attempts have been met by increased selling.

I have not liked the prospects for YLO for the last two years given that the ink on paper directories business that had been the foundation of the enterprise  has been facing increased competition from online sources. The hope back in 2009 was that the company could successfully transition to the digital domain and remain viable. Its not clear that they have met those goals.

In addition YLO sold their Trader Corporation assets in March of 2011 for $745 million inorder to pay down their debt and maintain the investment grade rating on their bonds. Recently there have been concerns that the deal might not close. The company has also seen some changes in management and insider selling which, given the circumstances, did little to boost confidence.

I would avoid chasing the dividend and look for better prospects.

Happy Capitalism!

Good morning Lou,

Interested on your take for RuggedCom Inc. (RCM). They just reported excellent results but stock hasn’t budged & volume very low.

Thank you,

Patrick

Hi Patrick,

Thanks for the assignment. RuggedCom Inc. (RCM TSX) provides networking  hardware and software that is designed for use in harsh environments. Over 60% of their sales revenue comes from electrical power companies that use their systems to better monitor the operations of their substations. They are also growing sales to railroads.

The research indicates that the company has a market capitalisation of $263.4 million which puts it on the cusp between microcap and small cap status. There are just over twelve million shares outstanding and over the last three months the average daily volume has been 14,423. Over the last 30 days of trading volume has exceeded the average only nine times. What I would surmise from the low volume is that the stock is closely held by management and patient investors who have been in profit since the IPO at $13.00 back in 2007.

Another factor to consider are the earnings. RCM has missed the street over the six quarters going back from Q3 FY11 and is scheduled to report Q1 FY12 on August 05, 2011. The forecast is for earnings per share of $0.20. The last thing to consider is the aggressive multiples on the stock. It has a price earnings ratio of 43 which implies anticipation of expanding growth. Clearly the company has been growing its sales and profits but perhaps not to the total satisfaction of investors.

Lets examine the charts for guidance as we move forward.

The three year chart illustrates the resistance $22.00 that RCM has failed to break above since August of 2009. When the company reported its Q4 results May 25, 2011 the results were not sufficient to push through the barrier.

The six month chart outlines the resistance at $22.00. The MACD signalled the sell off that started in mid February that took the stock down to $18.00. It also signalled a buy in late March that took the shares back to $22.00. Not a bad round trip for investors who caught the ride. Currently the indicators are flat.

The next flex point will come in August with the Q1 results so put that date on your calendar. RCM is a stock that is tightly held by patient investors and which has a small number of shares outstanding. The low volume of trading is not a factor given that reality. If the shares make a sustained move above $22.00 it can run to $26.00 without much resistance.

Happy Capitalism!