Research In Motion: Sure bet into earnings or a bull trap in the making?

Research In Motion (RIMM), maker of the benchmark business standard Blackberry Smartphone, is set to report earnings on 4/2/2008. Is it really an opportunity to buy before earnings because wall street is hyping it? Or is this a bull trap ready to annihilate uninformed investors who listens to the business media without scrutiny?

Consider:

- Stock has already made a huge move up (from the low of $93.36 to $115.34 = ~$22) since middle of March
- MACD (Although a lagging indicator) shows there's not much more room to run
- Stochastics indicate overbought status
- RSI is already at 60's, in the past 4 months, it has not gone up over 65.
- Still in a bear market
- High wall street expectations (100% increase revenue yoy)
- Too many wall street analyst raising its price target. ($150+)
- The past two times when RIMM Gapped higher THERE HAS ALWAYS BEEN AN ENSUING SELLOFF

Opinion:
The contrarian play makes a lot more sense and is much safer. If rimm post blowout earnings and the stock rockets 15-20 points, that would put it in the level of 135+ which according to Technicals will be WAY OVERBOUGHT for the short term. It leads me to believe it will sell off very hard after its move.

Plus, Apple's iPhone is the new standard of smartphone platform. Rimm's platform, unfortunately, is far out of date.

Let RIMM potentially explode to the upside (perhaps retracing its 52 week high level of $137) and then SHORT if somehow it defies logic and goes above its 52 week high mark of $137. If the company does not blowout earnings, or provides weak forward guidance, IT WILL TANK VERY HARD (possibly retrace back to its 200DMA level of $94).

Plan: Wait for the potential explosion to the high 130's, then ride the profit taking wave down (Possibly 15-20 points over the course of a few weeks) back down to $110-$115.

~$20 per share potential profit made short. 2 week target. 3-4% trailing stop. Bottom line: Not advisable to buy into earnings...in fact seems very risky at this point. Don't buy the stock based on the media hype. That's how money is LOST.

So if I am wrong, the most you will lose is 5-8 points on the continual upswing of people trying to pile into the stock for a few points. If I am right (as far as not going long into earnings or shorting it after its explosion), then I've either saved you from a ton of pain or even better, I made you some fast money. Invest wisely. Good luck

-DL

First post

I will be the first to admit, I am more often wrong than right. But isn't what makes us human?

With that said, I try damn hard to tip the balance toward my favor. And with the turbulence in the U.S. stock market, I've decided to create a blog to discuss interesting stocks that can present good opportunities to make money (both long or short).

Feel free to correct me if you think I'm wrong I welcome all comments. I welcome stocks that you know are good that want my opinion for. If you're a technical trader as well please feel free to tell me something I don't know. 

The bottom line is this: I just want to make money, and I'm sure most of you do too. And let's face it, Wall street and the media is full of shit with the things they say and are losing investors their hard earned life savings. It just makes me sick to my stomach. My thesis is if we want to make money in this market we have to move either before they do or with them. Acting after a move has already happened will just break our hearts. 

Luckily, we have something that even the pros use also. Technical Charts. That's right. What we see is what they see. And in a market where volatility are at levels never before seen, I believe TA is a tool we can use to stay in sync with the street. 

Well that should be enough of an intro. Let's get to it. Here is Mosiac (Ticker symbol MOS) and why I think while trading this stock may be profitable in the near term, holding onto it for the long haul may be a rough ride. Let's take a look at the 6 month and 3 year periods. 

Consider the Following:

- The Relative Strength (RSI) of MOS in 6 months have held up around 40. We are at 39.

- But, RSI is starting to show a downtrend, as indicated. 

- MOS broke the 50 DMA. But if the trend is still in tact,  there should be a strong rebound.

- Sell volume on the stock rose dramatically. But will we start seeing bids?

- Stochastics never fell below 20 in the past 6 months. We are at 31

- Negative Force index meter reading usually indicates an impending reversal. 

So what to make of this? The stock is right now is at a very crucial juncture. If it cannot start getting strong volume bids it is in danger of violating the 2 year bull trend. The only catalyst I can think of right now that may save it is Earnings due out in a few weeks. But in a market like this. Every day is an eternity. 

So at what price to buy? Here's the 3 year chart. 

If you notice from a 3 year chart MOS is in a definitive bulltrend. With the middle bollinger band (dotted line) showing amazing support at every test. Because of this, my target entry point to go long for a trade is around $85-88. With a stop at 80. If it follows the trend and reverses in the short term, we should be able to see mos return to the high 100's. 

With that said, the long term trouble that may emerge in this stock cannot be overlooked. Mosiac is starting to show signs of deterioration and a downtrending pattern. If earnings cannot push MOS back up to over 115+ and beyond, I smell some trouble. Time will tell.

Good luck to all of us.

- DL