RIMM – Bullish or Bearish? Depends on your Timeframe
I was taking a look at Apple (AAPL) and Research in Motion (RIMM) and spotted something I wanted to highlight to you. Adam Hewison just released a video entitled “RIMM vs AAPL: An Update” which got me looking at both of these charts, which led me to an confusing conclusion.
If you take a solitary look at RIMM’s daily chart, you’ll probably come away thinking RIMM is about to plunge lower.
However, it you take an isolated look at RIMM’s weekly chart, you might walk away and want to put a long (buy) position on immediately.
So which is it? And why do we get such a different result? Let’s look closer.
RIMM Daily – Bearish:
Looking at the Daily Chart, we see the following technical structure – price making a new high on a negative momentum and volume divergence.
As price peaked, we formed a clear reversal candle at the highs and volume has picked up steadily as price fell, which confirms the lower prices.
With the volume surge and new momentum low, odds favor lower prices yet to come, particularly given that price pulled back into overhead resistance and can’t seem to rise above the 50 day EMA at $72.00. This would mark a great area for bears to get short and place a stop above that level, if not above the 20 EMA at $75 and perhaps play for a trend reversal.
So you would walk away aggressively short if you looked only at the daily chart… but now let’s raise our timeframe to see the weekly structure.
RIMM Weekly – Bullish:
Again, let’s approach this as if we’ve not looked at the daily timeframe.
We see price making a steady swing-up to new 2009 highs which formed on a new momentum high and price has pulled back sharply to the confluence zone of the rising 20 and 50 EMA… though the 20 is lower than the 50 and price only recently crossed above them.
With last week’s doji and the current week’s doji, one might be jumping to put on a long trade here to play for a possible bounce from these confluence levels to play for a new high yet to come. The stop would be around the $67 area with a minimum target of $85 if not beyond $90.
So which is it?!
Short off the daily chart and hold your stop above confluence EMA resistance?
Long off the weekly chart and hold your stop beneath EMA (semi) confluence support?
I’m merely highlighting why it’s innefective to do analysis on a single timeframe in total isolation. You’ll sometimes get scenarios like this that make your head spin.
It’s probably a better idea – unless you’re aggressive – to wait for a break of one of these levels and then go in that direction. Price can’t stay here forever – it has to break one of the two confluences.
Take a look at Adam Hewison’s recent update video on Apple and RIMM for more insights – but let this be a lesson that multi-timeframe analysis (similar to that of Brian Shannon of AlphaTrends.net) is superior than single timeframe analysis.
Remember – July 1st at 12:00 is when you can see my free presentation rebroadcast from the Los Angeles Trader’s Expo – “Idealized Trades for Intraday Traders” from the MoneyShow.com.
Corey Rosenbloom, CMT
Afraid to Trade.com
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hi,
if you look at RIMM fundamentally you will find that it is very profitable. The EPS Growth rate is exellent, so is the ROIC…
Who remembers the Gap up after the last earining report? i do! 🙂
It's not that I've moved away from considering fundamentals #1 (I came from that background) it's just that I've found more success personally in the technicals.
I always recommend people supplement my analysis and postings with their own research, including fundamentals.
And I encourage people to post comments like this to share with other readers and thank you for bringing this to our attention!
This is a great example which begs the question – Can their be a shorter duration move counter to a longer duration trend?
The answer is yes, but liken it to someone rowing against the tide. A price move counter to the larger trend may occur, but will tend to be muted and shallower. Price moves are more dynamic when the directionality of a shorter duration trend aligns with a longer duration trend.
Run with the tide!
how long can a formation like that go sideways and be a possible “bear flag” vs just consolidation? one concept im finding more useful is to put more weight on support/resistance levels vs. relation to moving avg. So while this hasnt been able to reclaim the 50 moving avg, it has found support at same price level as Late april/may support. A bull or bear flag is a continuation pattern, no? So there should b elittle or no support/resistance levels in the path of a continuation pattern right? just throwing this out tehre for discussion 😉
Here is my thought, RIMM retraced last year's massive drop 50% on the weekly before it turned around. It has almost retraced 38.2% of it's uptrend out of the double bottom and it's sitting on the 20 week EMA. There is support back in Aug of '07 but it isn't close enough for my liking. There are definite possibilities for an upside on the weekly (though they could be continuation doji's just as easily) while the daily is clearly bearish. As you said, this highlights the need to look at the timeline above and below your primary one. Some people might feel confident enough to trade RIMM right now but for me the conflicting messages is enough to move on and find a better opportunity. Thanks for the post!
It is a pleasure to do that, I also read your posts often and enjoy them a lot. Last time with the Oil analysis I posted some fundamentals, and it seems that this oil positontrade is working out to be very profitable…
best wishes from Vienna, Austria
From an investors' persopective, RIMM is halfway through a symmetrical triangle (monthly semilog chart), the bottom of which goes back 4 years. This longest-term timeframe hints at the conflict posed by the two shorter-term timeframes.
It is a pleasure to do that, I also read your posts often and enjoy them a lot. Last time with the Oil analysis I posted some fundamentals, and it seems that this oil positontrade is working out to be very profitable…
best wishes from Vienna, Austria
From an investors' persopective, RIMM is halfway through a symmetrical triangle (monthly semilog chart), the bottom of which goes back 4 years. This longest-term timeframe hints at the conflict posed by the two shorter-term timeframes.