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.