We were in and out of this stock at precisely the right time, with a 3 to 4 dollar gain. From here we have absolutely no idea what will happen next so staying out is the way to go. At $25+ it is not a buy, at $ 10 or lower it might be, time will tell.
We were a little early and tentative to start but when this stock hit $12.80 we did recognize it as a major low. As mentioned then , the stock is probable worth more than $20 even in a break-up situation and the targets of $10 or lower seemed a bit ludicrous. Had you bought at $14, you are now up 20%+. I suspect that it will go further but usually not in a straight line. At $20 (about 50% up) I would be out in any case.
Walgreen the US medicine cabinet reported earnings and supposedly the results were a little disappointing but that is not the issue here. What is, is that the stock made a classic B-wave of the kind that I have shown at least two dozen times or more. This one is particularly interesting because the two legs in the B-wave, A and C, are absolutely, precisely to the tick, perfectly equal both with respect to the distance travelled and with respect to the direction, a.k.a vector equal. I have never stopped being amazed how often this perfect symmetry occurs.
We have another one that has done the same, albeit in a bear market as apposed to Wag’s correction. Guess what, it is none other than RIM!
First of all, if you look at the green arrows, deliberately put a little to the left, you will see that the arrows are absolutely perfectly vector equal! This probable occurred yesterday when the stock hit a low of C $ 12,80. The chances of a turnaround happening, seemingly by accident, at exactly such a moment are pretty high as markets for some inexplicable reason love symmetry.
The other , in my opinion , fascinating aspect is that history does repeat itself or, at the very least , it rhymes. The drop in the small circle back in 2000 and 2001, is about 90%, just eyeballing it as I do not have precise charts. The drop this time around, from $150 to $12,80, is just a little over 91%. Furthermore, the patterns are both A-B-C’s where the A and C legs are vector equal (the small one is a flat and the big one a zig-zag).
It is not an accident that only yesterday every Tom, Dick and Harry fell over themselves to downgrade the stock and find reasons to stay away from it. Today there are rumours of at least three major suitors thinking about becoming a white knight, Nokia, Amazon and Microsoft among them. Now the word is that RIM is worth more dead than alive.
Time will tell. History may not repeat itself again but there may well be a few bucks to the upside. This is certainly the case if the C wave from $95 to $13 is indeed a diagonal!
Walgreen, by the way, probable completed a first 5-wave sequence down and could rebound back to about $38. Then it is a sell.
So again I am a little early but having been mostly negative on the stock since it traded at about $160, I am still inclined to be a buyer rather than a seller. With the overnight drop of another $1.50+ the stock is now close to the bottom trend line. Also the stock has a 5 wave pattern (arguable) and the RSI is going through the 30-line. MACD is already rising. Deutshe Bank came out with a target of $10. A mutual fund manager(Orion Capital Management) sold his entire position today. The stock is trading at 2 1/2 times earnings, it has $2/share cash, 75 mln. subscribers and by far the best security level on it’s own network. Obama loves it. There are two bullish analysts that are bucking the trend with a value of $26 and $22 respectively. Everybody else hates it, some because of a couple of very rowdy British expatriates employees that allegedly were rather inebriated on their way back to Canada. Time will tell.
Research in motion just keeps going and going. It has lost 87% of it’s former value. All the analysts and brokers that thought it was a buy at $100 + are now in a decidedly nasty mood. This is what they mean by buy when there is blood in the streets. The company is reporting tomorrow and my gut tells me this is a buy for at least 3 to 5 dollars. Unfortunately my EW analysis of a wedge did not work even if the stock kept hugging that line. Time simple ran out, but now may just be the right time for a quick trade.
Homebuilders have been doing just great the last few years. Pulte is right up there with the big boys. Just as in the case of Sino-forest, we know absolutely nothing about this company, and frankly we do not care. This is a buy, plain and simple and the reason will become evident in due time. A full circle bubble AND a nice triangle. We should go back at least to $7/8.Definitely this thing can go a lot higher but one simple should not speculate, take the low hanging fruit and let someone else worry about the rest.
By the way EK should make it to $3.50 tomorrow and if RIM gets another $ or two, sell.
I have suggested a pairs trade on this couple before. It was a complete disaster which is why stop-losses should be used whenever and wherever possible. Stocks in these markets are often traded on momentum , that is that they are bought on the simple expectation that there will be a greater fool down the road. There is until there isn’t. NFLX seems to fall in this category.
As predicted, before the recent earnings came out, AAPL went through $400 in after-hours trade and today it did it during normal trading hours. RIM on the other hand announced that it will lay-off 2000 employees and is suffering from minor palace revolutions. The stock is in the doghouse. Here are the charts;
As you are aware from previous blogs, I think AAPL is topping and RIM is bottoming. For one thing AAPL is now worth over 300 bln, the second largest capitalization after XOM (Exon) at a little over 400 bln. However you slice it, it is difficult to make sense of that. RIM in the meantime is suffering from “confirmation bias”, according to David Olive in today’s Star. I had never heard of that term but I assume it is what you get when non-thinking people get together with like minded colleagues and go through the “misery loves company” exercise. We already know that stocks are the only thing that sells better at a higher price than a lower, but maybe this has gone too far. In the same article Olive gives the following facts; RIM outperforms Apple in return on equity 41.4% against 35.3%; in terms of R&D spending RIM spends $1.4 bln or 6.8% of revenue for essentially a single product, Apple spends $1.8 bln or 2.7% of revenue on a multitude of products. Rim trades at a p/e of 4.5, Apple at 15.8. Rim has the ultimate security, Apple does not. Anyway , apart from fundamentals the chart tells the story. Here the two are combined;
RIM is in beige and Apple in black. RIM has a count that supports the idea that it should go up from here. Apple can be counted as having a top here. Most importantly is the difference which on BigCharts can be shown in the bottom window. Notice that for most of the past 10 years RIM consistently out-performed. That changes after 2009 1/2. The critical thing is the vertical distance between the two; it has never been wider! You can try the pairs trade again. Sell one AAPL and buy 8 RIM roughly, but keep a stop at whatever your tolerance is, 10%??
It is pretty hard to be wrong , even for just a little while, I hope. TRE , CCO and RIM, all three played games one way or another but all are at or around recommended levels.RIM is particularly interesting having dropped about 62% from the high in March. We may not like Mr. Fibonacci but he is everywhere!
If there is a problem counting a move, invariable you can rely on this formula, 5 is normal, next stop is 9, 13, 17 etc. etc.(remember the old formula regarding spaces between trees, n-1) , all are still 5 wave moves. Next stop, I hope,$42. This was an extended 5th wave., which typically retrace to the top of wave 2 of 5.
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