Research in Motion: a dirt cheap stock?

November 29, 20128 Comments

 

Canada seems to have a propensity for producing superstar stocks that eventually go down in flames. I’m sure that you can think of several yourself. But to take a quick stroll down memory lane, recall the lofty heights, followed by the deep losses for such Canadian “can’t go wrong” stocks as Bombardier (2001 price of $26, today at $3 and change), Nortel (y’all know the story), Bre-x (ditto), and now Research in Motion.

I’ve never been one to buy a fallen angel. That’s because these angels usually never get up to walk on their own again. But, sometimes there are opportunities for speculators who trade high-risk, short termed movements for kicks and giggles. RIM is just such a play. There’s just too much at risk for a sensible, conservative investor to consider in this stock. But for those who like skydiving, racecar driving, and Australian-rules football, this one may be for you!

RIM broke its 2-year downtrend in early October. I was on BNN MarketCall right around the time it had broken the trendline. A viewer called and asked my opinion on the stock. Truthfully, I get asked about RIM on virtually every appearance of MarketCall. Anyhow, my response at the time was, I liked the break in the trendline, I liked the base it was putting in, and I would buy it on a break through the neckline $8.50. Keeping in mind that it is a speculative play, of course.

Well, it broke our neckline. An aggressive rally to $12 took hold, and its pulling back a bit as I write. Its above its 50 day MA which is sloping up, and it’s also above its 200 day MA (sloping down), which it tested Wednesday. Nice volume on the breakout, too. Would I buy this stock right now? Personally, I’d consider it for my “mad money” if it came back into the neckline zone of around $9.00 – although it may just be a buy at current prices if the 200 day MA is held. I’d target a double from there to $18, providing all goes well for the new Blackberry 10. And that’s the risk. If things don’t go well with the new phone, this once-mighty Canadian icon might become another disaster story. Ever the Canadian flag-waver, I’m rooting for them, but not yet buying the stock.

Keith on BNN MarketCall

I’ll be on MarketCall’s evening show next Friday December 7th at 6pm to answer your live phone-in and emailed questions on the show. Feel free to call me about an opinion on RIM. I’m used to it.

8 Comments

  • I always get a kick when I hear analysts call a stock a “speculative play”. In truth what stock is not a speculative play? The lesson here with RIM is that even so called unloved “bad” stocks can get grossly oversold and yes it perfectly fine to step in and buy at that time.

    Reply
    • Dave–there is no doubt that a stock like RIM is far more risky than a stock with a highly predictable revenue stream and low-beta profile. RIM has a great technical pattern, but its not exactly like buying Enbridge. RIM looks like a good play from here, but not without risks as mentioned in the blog (the new phone’s success, to be exact). A great stock for someone with an eye for trading and stop-loss strategies, but not so much for Gramma.

      Reply
  • ON THE US DOLLAR:

    “ON FRIDAY (NOV.23) THE US DOLLAR INDEX BROKE FIRMLY BELOW ITS 20 AND 200-DAY MOVING AVERAGE. MOMENTUM SELL SIGNALS HAVE ALSO BECOME APPARENT. A BREAK BELOW THE 50-DAY MOVING AVERAGE AROUND 80 COULD SEE THE INDEX TEST SIGNIFICANT SUPPORT AROUND 78.60, A LEVEL THAT IF BROKEN COULD SEE STOCKS ANS COMMODITIES EXPLODE HIGHER” (EQUITY CLOCK, NOV 26)

    “THE PAST ACTION OF THE PAST FOUR DAYS (NOV. 26-NOV. 29) HAS EFFECTIVELY DERIVED A BEAR FLAG PATTERN, A SETUP THAT COULD SEE THE CONTINUATION OF LAST WEEK’S DECLINES, PARTICULARLY IF LEVELS OF SUPPORT ARE BREACHED.THE INDEX IS FINDING SUPPORT AT ITS 50-DAY MOVING AVERAGE (…) A BREAK OF THIS KEY LEVEL WOULD INCREASE DOWNSIDE MOMENTUM, PARTICULARLY AS WE ENTER THE MONTH OF DECEMBER.” (EQUITY CLOCK, NOV 29)

    GOOD DAY,

    JEAN-PIERRE

    Reply
  • Kieth,

    I took your advice on the $8.5 and sold at around $12. However, the stock was a bragin at $6.5 but I didn`t buy.

    Love the product and the new BB10 looks amazing it does exaclty what I need my phone / mobile computer to do. So I hope it`ll be a hit, but at his point it`s a trading vehicle for me.

    Reply
  • Hi Keith,
    Please way in on two other loved Canadian looser’s in ERF.T Enerplus, and BNP.T
    Bonavista. What do you think of the charts and fundamentally the commodity;Natural Gas Would you buy now?

    Thank you,
    John Ferrari

    Reply

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