Stock to Watch: Research in Motion
Friday, September 7, 2007
I want to preface this by saying that this is meant to be as a swing trade - I haven't done enough due diligence on the company to recommend it as an investment. But, I have done enough DD to know that Research in Motion (NASDAQ: RIMM) is a fundamentally strong company with amazing growth potential. The problem with the stock is its very rich valuation. If the growth train were to stop I think RIMM could have a lot of room to fall. Nevertheless, here's the trade: the stock is heading for support in the high $70s. If it dips below $77, buy - but keep very tight stops.
Ride the stock up to its support in the high $80s and then sell. Easy enough, right? Although it is difficult to see on this chart, I think a head and shoulders pattern might be forming with the first shoulder at $84 and the head at $86. A strategy that could work well here is to set a $1 trailing stop once and if the stock hits $83.50 - that means at worst you'll have made a $5.50 gain per share.
One final thing I want to say is that RIMM is one of these weird companies that reports earnings in between earnings seasons; they're set to report their Q2 earnings on September 27th. The stock is extremely volatile and holding through the earnings report is going to be nervewracking. If the trade works out and you can take profits before the 27th - take them!
Posted by Rob Pitingolo 8:39 PM
Labels: Research in Motion
