Stock Chart Analysis RIMM

Posted by downtowntrader | 9/06/2009 10:01:00 PM View Comments

Stock Chart Analysis RIMM
Research In Motion Limited (USA) (Public, NASDAQ:RIMM)

There is a pretty interesting chart setup developing in RIMM. RIMM has been flying a little under the radar recently with all the recent focus on Gold Miners, Financial Stocks, and even American International Group, Inc. (NYSE:AIG). Even in the mobile phone space, its all about the Apple, Inc. (Nasdaq:AAPL) I-Phone or the Palm, Inc. (Nasdaq:PALM) Pre right now.

However, RIMM has been consolidating a breakout from a substantial double bottom pattern on the weekly chart for several months. The two lows for the double bottom occurred in December 2008, and March 2009. RIMM has been coiling tightly, as it trades in the triangle highlighted in the chart below. A breakout in either direction should yield a great trade opportunity.

It's interesting that not a lot of people are talking up RIMM bullishly. In fact, based simply on my observations, it appears that more people are generally bearish on RIMM. While RIMM is not heavily shorted with only about 3% of the float held short while PALM has roughly 36% of the float held short, the majority would probably not believe in a full fledged breakout in RIMM. This would probably work in the bulls favor, as people betting against a rally could provide more fuel for the fire.

Beyond speculation on the underlying sentiment of RIMM traders, the chart for RIMM, while still technically in a consolidation has bullish implications. RIMM has refused to trade down to test the double bottom showing a willingness for investors to pay higher prices in order to get in to the stock. The huge gap on the chart has not even been challenged, which is also a bullish sign. RIMM has also been setting higher lows on each pullback. Also, triangle patterns are usually continuation patterns, and the trend heading into the triangle was up. RIMM is currently trading up to test the upper range of the triangle and could be close to breaking out. While a break of the trendline would be a valid signal, the first true test is for RIMM to clear the August high. This could possibly signal an end to the consolidation via the higher high. Of course a failure must also be accounted for, and if RIMM falls out of the triangle, then a test of the double bottom neckline should be expected and possibly an attempt at the gap fill. With either scenario, a sharp move appears to be in the cards for RIMM. Earnings are on September 24, so the question is do we get a move into earnings or after?

Good Trading,


blog comments powered by Disqus