Research In Motion ($RIMM) reported their earnings today and let’s just say it wasn’t so good. If you don’t know by now, the charts don’t lie, so let’s take a look at what they’re telling us right now.
One of the first things you’ll notice is how much RIMM has fell in the last two years. What’s interesting is that when the iPhone came out in the summer of 2007, RIMM actually exploded to the upside – going from about $45 to $130 before the year was over. It then pulled back a bit an then made new highs at $148 in June of 2008. Another interesting fact is RIMM started it’s massive decline in June of 2008 – around the same time the iPhone 3G came out and was under a subsidized plan (meaning you didn’t have to pay $399 or $499 anymore, it was only $199 or $299 with a 2 year contract). Coincidence? Maybe.
Alright, let’s dig deeper and see what’s happened.
If we take a look at a weekly chart, you’ll notice that RIMM has made what I call Three Symmetrical Drives down. Each one of those blue arrows was literally copied and pasted – so in terms of price, RIMM has been dropping in a continuous “rhythm” since September of 2009 (around $85) after it popped up from the 2007 – 2008 stock market crash.
The next thing you’ll notice is how well (in addition to symmetry) RIMM has been respecting the Fibonacci extension levels of each leg down. When you measure the first leg down, you’ll notice that once it got down around the $45 dollar level it held that price level and popped back up – and now that we’ve measured the leg that started around $77 down to about $42 you’ll notice that the 1.272 (-27.2) Fibonacci extension is around $33. You’ll also notice that the 1.618 (-61.8) Fibonacci extension of the last leg has confluence with the more recent leg at the 1.272 (-27.2) extension.
Does this mean that RIMM will hold around $33? It’s certainly was possible, up until today’s news.
In addition to all that, if we take a further look back on the monthly chart you’ll notice that RIMM is approaching a significant area of structure support ($30′s) that lasted from late 2004 until mid 2006, so it’s feasible that RIMM could hold up around here.
However, as Steve Jobs would say…”There’s one more thing…”
If RIMM manages to break through all the analysis we talked about – the weekly symmetry (which it has), the Fibonacci extensions (which it has), and the structural support (which it is), what could happen? Well, If we use the same Fibonacci extensions and measure from the high’s of 2008, to the lows of 2009, the 1.272 (-27.2) extension show a move down to about $4 – an area RIMM hasn’t seen since 2003.
So am I buying RIMM here? No. Despite Android and iPhones making serious gains on RIMM, I have no trading signal. Remember, even though we are seeing the use of amazing Fibonacci extensions at work and and symmetry, if I’m not getting a trading signal that is in accordance to my trading plan, then their is no trade. I will say this though – If RIMM manages to break through – down into the 20′s, I’ll be looking for shorts on the daily time frame charts to try and ride this possible move down to $4.
Hope that helps!