Glad I Bought RIM

A few posts ago I mused that Research In Motion at $23 was almost a joke – unless the market knows something we don’t know - but I don’t think RIM is going bust anytime soon. The technical view of RIM is one of the worst big cap train wrecks I have ever seen. The weekly displayed the MACD falling with no divergence in sight, the 10-week price channel has been falling for 19-weeks, the 10-week ROC has been negative for 20 weeks and the per cent divergence (CP#) from the 30-week MA is at a historical record of negative 50 per cent. RIM was so bad it has to be good

Now a few weeks later I see some technical good news on RIM based on a relative perform analysis on RIM vs. AAPL. The break down in RIM began last March 2011 when RIM slipped below $65 and began to under perform its rival Apple Inc. Note the series of under perform numbers through to early August. Now we can see the early up turn in RIM vs. AAPL and so I will stay with the position until the relative turns against me. Keep in mind that what is good for RIM is also good for the iShares Info Tech exchange traded fund (TSX-XIT)

Elliott Wave Basic Tenents

The nasty selling panic that began three weeks ago has confused the fundamental and technical analysts. The fundamental guys fear a recession along with declining earnings and those risky European banks. The technical guys study the MACD, the RSI, stochastics and moving averages. The only thing that works is Elliott Wave because when the count is applied to long term charts we can see where we were and where we are going.

Our first chart is the basic 8-wave count of a full bull and bear Elliott Wave count. Note the bull phase – impulse wave to (1) which is followed by a counter trend corrective wave down to (2). We then get an impulse wave to (3) which is followed by a counter trend corrective wave down to (4). We then get the final advance to (5) which is then followed by an A-B-C or three wave correction or bear phase.

Some basic tenents are the corrective (2) will never violate the low of impulse wave (1). Impulse wave (3) is never the shortest wave and the low of corrective wave (4) will never enter the space of impulse wave (1). The theory of alternation holds that if corrective wave (2) is short and simple than corrective wave (4) will be long and complicated. So there you have it as set out in our simple diagram

Now I am illustrating an Elliott Wave count on the Dow Industrials using weekly data to set out the 2009 to date 1-2-3-4-5 bull advance count and the subsequent A-B-C correction or bear phase. Note the last C wave corrective wave has been a sudden and sharp decline accompanied by fear, confusion and panic which is typical of a C wave bottom. If this is a bottom then we start into a new Elliott Wave 1-2-3-4-5 wave advance that should run through 2013. Keep in mind that a new impulse was (1) is always thought to be a bear market rally

I Bought RIM Today

The current liquidation of equities is a global event which I will address on the weekend but today’s broad collapse has to deliver some opportunity. Now Research In Motion at $23 is almost a joke – unless the market knows something we don’t know - but I don’t think RIM is going bust anytime soon.

The technical view of RIM is one of the worst big cap train wrecks I have ever seen. The weekly displays the MACD falling with no divergence in sight, the 10-week price channel has been falling for 19-weeks, the 10-week ROC has been negative for 20 weeks and the per cent divergence (CP#) from the 30-week MA is at a historical record of negative 50 per cent. RIM is so bad it has to be good