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Stocks - The Only Asset Class to Own. Is RIMM Going to Run Out of Steam?
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February 2, 2024

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PDT

I understand the history and all of the successes of our government can be largely attributed to the well thought out concept of establishing a structure that allows for a system of checks and balances. However, it can often appear sometimes that many of us are played by the media and the rhetoric that comes from both sides of the aisle. Yes, we've got both sides working hard to resolve some important fiscal issues right now, but somebody needs to tell these people who are responsible for working on these issues that we're not interested in hearing about who is failing or who is not cooperating enough. We don't care which side you want to blame, or which side is going to get the credit. We just want to know that you're all working in the best interest of the people to get things done. If something doesn't get done, or if there are delays on why it's not getting done, we are really not interested in hearing about who is at fault, from either side. For once, it would be nice to see both sides shut their traps in front of the media and quit making their political agendas more important than the issues at hand. I say this because I saw a headline this morning suggesting the White House is threatening to veto a particular plan when in fact, the only reason for the publicity is to continue to divide the people in this country for political reasons. Who really cares about that other than them? All we care about is having a great opportunity to have an economic environment we can all take care of our families and future under, right? I don't care who gets the credit and nor should they. Our children are smarter than these people sometimes. Since when does your child's youth sports team win a game, and your child stands up and takes all of the credit? It's a team effort. Be a team for God's sake. Enough already. I do like the way the markets are behaving though. Although I mentioned yesterday we're up against a very logical resistance level, sometimes the strength of the market can buck everything that's logical. I've said this before and I will say it again. I believe this market, short-term pull back or not, is going higher in the months ahead. There's no other asset class for big money to generate a better return right now other than stocks. We all know what's been going on with bonds and other financial derivatives, so while much of the country continues to worry about the potential economic woes that lie ahead, big money investors are likely going to continue to flex their leverage and take this market higher. Let me point out this morning, if we do start to hear a deal isn't going to get done by the end of the year, and the market starts to slide, we may want to use that weakness as one of the better buying opportunities we could see for months. I've included a chart of the NASDAQ Composite here today, which I include just about every day, showing you the resistance level where we suggested the market may want to pause as we move closer to options expiration this weekend. However, as you can see here, so far this morning, the volatility is extremely light. Although the day is not over yet, even the slightest down day would be good for the forward looking short-term picture. It doesn't appear as though this market is necessarily done going higher before it does decide to do some backing and filling. As a matter of fact, if the Composite can hold yesterday's high today, based on some fib expansion levels I've drawn here, there's a good possibility we may see 3101 on the Composite before you know it. This would also put the S&P somewhere around the mid-October high of roughly 1465. However, if the indexes do start to show some weakness around current levels, I wouldn't be overly concerned, as it would be a welcomed opportunity to potentially expose ourselves for higher levels and better returns later. We provided some longer-term analysis last Friday suggesting the snapback November has made the monthly charts of the indexes look very appealing. Although volatility on the monthly charts would suggest a potential top, we haven't seen it yet. As it stands right now, we have no clear indication these markets want to move lower and take out the November low on a longer-term basis, and the reason I point this out is we need to remember this if the media turns on everyone and starts screaming the sky is falling because a deal isn't getting done. Ball Sits on the RIMM It's no secret we suggested an entry into RIMM when the stock was under $10 per share before it made its quickest move up the charts in quite some time. However, with the Blackberry Maker reporting their numbers tomorrow after the close, it poses the question of locking in profits, or continuing to expose the positions for bigger returns? Of course we could be wrong, but I don't suspect tomorrow's numbers are going to be the catalyst for the way the stock trades going forward. I think more importantly, any clues revealed by the Company regarding the launch and potential successful acceptance of BB10, and their new OS, will likely continue to be the catalyst going forward. Once they launch early next year, that's when the jury is going to show up in force. If you're gut has you a bit nervous over tomorrow's earning's report, maybe you should lock in your profits now and step aside. Regardless of what all of these Wall Street talking heads and analysts are saying right now, only an insider knows what tomorrow's report is going to reveal. I can tell you this. There's nothing technically suggesting shares of RIMM are done moving higher. However, when you're up over 40% on an idea in as little as a month, it's almost absurd not to take at least a little money off the table. Like we always say, nothing goes up in a straight line, but depending on your investing or trading goals, it's always prudent to consider what could potentially happen in the event something significant becomes the catalyst for a stock to reverse its trend. I've included a daily chart here of RIMM. You can see the confluence area I've circled over to the far left of the chart dating back to March and April of this year when the stock tried to find some footing, only to continue its slide lower. I suspect that confluence area may provide a bit of resistance in the short-term as many bullish bag holders from those levels use the recent strength to get out for a break even return or a slight loss. However, look at the strength of the volume over the last few months. That's no joke and it's hardly just a bunch of individual retail investors. Additionally, you can also see shares of RIMM have gravitated back to the 3X3 DMA on this daily chart. All normal activity, and since the stock has made such a parabolic run in such a short amount of time, a break below the 3X3 would not surprise me at all. However, just like we pointed out yesterday, when a stock like RIMM is thrusting its way up the charts, a brief pause back below the 3X3 can often be used as another re-entry into the stock. Typically, when a stock is making a move much like RIMM has made in recent weeks, a break below this important displaced moving average for about three periods can be common before resuming its upward trend. What you can't see here, which I also mentioned the day we suggested getting into the stock is, on the weekly chart, it appears RIMM could gun for the $16 level before it actually runs into any significant resistance, so you've got to weigh the risk/reward here. Do you want to stay in for the short-term and see if you can shave another two points, which would result in roughly another 20% gain on top of what you've already made, or do you simply get out between now and tomorrow in hopes the stock pulls back? If I was a long-term investor, I'd be in as long as I'm in the money, but if I was a short-term player, I'd probably take about 60% of my position off the table, and let the rest ride for potentially higher profits. Nobody ever said you need to sell everything or go all-in on an idea. It's quite ok to take money off the table and maintain some exposure. If you didn't manage to jump in when we first suggested the idea, today or tomorrow is not the day to do it. Exercise a little patience and see what Friday brings for the stock.