RIMM Volatility Alert: Longer Term Technicals Could Create Wide Bands

Posted in General 
July 16th, 2008

This morning we issued a pre-market down-volume and downward price alert for Research in Motion Ltd. (NASDAQ: RIMM) in early trading with the note that shares could be more insulated than in prior sessions. Shares have actually recovered from lows of $102.81 intra-day and are all the way back up to positive by 0.5% at $106.40 (11:05 AM EST) on 9.7 million shares.

Our second alert here is being issued because RIMM shares are now in a technical no-man’s land. It has broken all of its key moving averages over the last week or so. It looks like it broke through that 200-day moving average support level back on July 11and we still show its 5-day moving average up at $109.08 based upon today’s prices.

So RIMM is now going to whip around based on the minute charts but if any macro-events rule over short term trading then we would alert that you could see very large price moves to the upside or downside. If we go back to March and look at the intra-day lows for an average we would put intra-day support levels if it sells off drastically around $94.00 and around $98.00 for a first-line of closing support. If we see an macro-events cause price swings to the upside then we’d put resistance around $109 first (near 5-day moving average) and then a more solid target of close to $115 second (for 200-day moving average). Keep in mind we are using simple moving averages rather than exponential averages.

We readily admit that the real trader support and resistance levels are going to run circles more around the minute charts rather than the moving averages. Our levels here will also change daily based upon those moving averages changing, but those are going to be more around resistance as the technical damage has been done.

We’d also alert that traders may switch out of the stock and begin using the options to trade rather than the stock if they feel they can make a directional call as the near month options expire Friday and we have roughly one-month to August expiration.

Jon Ogg
July 16, 2008

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