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Thursday, December 04, 2008

Intraday Action of Research In Motion Limited (NASDAQ:RIMM)

Research In Motion Limited (NASDAQ:RIMM) gapped down on Wednesday on issuance of downside guidance, ahead of its earnings report to be announced on 18 Dec. However, it managed to close up the gap, probably in part due to the general market strength.

On 15 min chart above, it broke resistance @ $37.5 and after printing 3 solid bullish bars, it stalled at the downward sloping 50 SMA. Placing Fibonacci retracement from day's low to swing high of the day, the retracement found support at around 50% Fib level. At 2pm ET, it formed a inside bar just below resistance @ $37.5. A good entry would be long on break of inside bar high, which is also a break of the resistance. By then, the 50SMA slope has also become flattish and converging with the 5EMA & 20EMA. Place stop just below inside bar low and partial profit at previous swing high. As it approaches round number $40 and also 38% fib extension, take final profit or keep a tight stop.

Note: There are 2 reasons, in my opinion, why the earlier break of resistance @$37.5 at around 10.45am ET is not such a good entry for going long:

-It is just about less than $1 away from the downward sloping 50SMA, where the upmove may potentially store. And especially if you're trading options, this is not a very favourable reward to look at.

-If you look at the 5min chart below, before the break of resistance @ $37.5, it made many consecutive bullish bars without any consolidation. It is higher risk setup if you enter here as price could pullback / consolidation anytime.


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