Wednesday, December 03, 2008

Ambush Trade - Research In Motion Limited (USA) (Public, NASDAQ:RIMM)

Ambush trades are defined as 50-62% retracements after a thrusty move in either direction. This setup is a cash cow over at TradetheMarkets.com. But one thing is for sure, they have much wider stops than I'm willing to risk, so I have to modify the strategy to fit my trading personality. Rather than just jump in if price holds the 62% Fib. retracement level on a closing basis, I'm looking for a tradable base or pattern.

After gapping lower on the open, RIMM produced a thrusty move then retraced into the ambush zone. It carved out a double bottom and once I was satisfied with the setup (trendline break), I went long. Keep a tight stop on this setup because if it fails, it's going to make a fast move in the opposite direction. The preliminary target is a retracement back to the high/low of the thrust, and the secondary target is the Fib. extension. If it struggles to retrace back to level one, then fold.

In case it's not obvious, a thrusty move must have all, or most of the candles in the color of the move - green for long and red for short with big volume. The objective of the setup is to capitalize on the direction of the thrust assuming smart money is behind it.

Amtech noted the following in pre-market: RIMM pre-announced last night, and a miss was expected, only the magnitude was unknown. The subscriber miss is not surprising and firm thinks better than most had feared. Rev guidance suggests handset units were 600k—700K light at about 6.4 mln units. Firm believes a relief rally is probable. From these levels, the gross margin outlook is likely to separate the bulls from the bears. While controversy will not clear in the near-term, firm believes in the secular story and think the stock can provide very significant returns from here. New products came later than expected, but did drive subscriber momentum, and record activations were achieved in the last week of the qtr. Trajectory through the holidays and into the New Year is key for the stock.

My thoughts: Blackberry Storm is getting bad reviews and I believe that if a new product development doesn't work out, it should be scrapped. Don't punish your subscriber base with crap. But since RIM is Canada's only high tech success story, in my heart, I hope Amtech is right.

2 comments:

john said...

You might say that a thrusty move, followed by a doubled bottom as in today's RIMM chart, is a thrusty-busty set-up.

Nice trading.

Jamie said...

LOL,

Yeah John, call it as you see/feel it. Your suggestion is definitely more visual than "Ambush" and easier to remember.