Shares of Research in Motion (RIMM – NASDAQ FusionIQ Rank – 53), maker of the BlackBerry, have been on fire over the last two months, soaring over 88 % through today’s close. After today’s close, we all discovered why Research in Motion’s chart has been so explosive of late, as the company reported a narrower-than-estimated loss after embarking on a cost-cutting plan. Cash holdings increased to $2.9 billion. Excluding some items, the fiscal third-quarter loss was 22 cents a share, the Waterloo, Ontario-based company said today. Analysts had predicted a loss of 35 cents on average, according to data compiled by Bloomberg. Revenue was $2.73 billion, topping the $2.66 billion estimate.
Which brings us back to the title of this piece. RIMM is a great example of how technicals work. As the chart below shows, over the last few months RIMM had many sessions with shares rising on above-average volume (noted by green arrows). Those heavy volume sessions were signs of aggressive accumulation. At the time the stock was being accumulated, the fundamental outlook for RIMM was universally dour. In fact, even with a meteoric rise of 88% over two months, there are STILL are only 6 BUY ratings by Wall Street analysts as of this writing. 6 ! However, there remain a staggering 26 HOLDS and 17 SELLs !! Of course, this will all change tomorrow when many analysts upgrade the stock … AFTER THE NEWS, AFTER THE FACT and AFTER AN 88 % PRICE RUN UP !!
Meanwhile the stock, by its strong price action, had told the world many times over the past few months that something positive was going on !
You see, to us a chart is a reflection of all known and obvious data and – here is the key – data known or uncovered by a select few ! This early group manages to figure things out, whether due to better industry knowledge, the fact they’ve uncovered some key channel data, or just have access to info they shouldn’t (yea, that still goes on !). This group buys early, when there appears no reason to buy, knowing the factors driving their investment will soon be obvious to the masses. You see, charts don’t just go up and down without reason … there is always a reason for a trend. The key is figuring it out, or having enough confidence - based on years of experience – that the good picture is leading the good story !
Back on November 23rd in our post – The Numbers Don’t Lie we referenced the stock price performance of smartphone makers, showing the relative strength leaders and laggards.
RIMM 6 Month Daily Chart
Also note the great FusionIQ BUY signal back in early November !!