Gaming RIMM

I want to show you how Research In Motion (RIMM – The Blackberry maker) has traded the last few days, because it is a lesson in how Wall Street tries to take your money.

RIMM
RIMM had a sharp rally and then spent days in a trading range (Green and Blue Lines). That is normal. I’ve told you ad nausea that stocks make sharp moves, then consolidate and then make another sharp move in the direction of the previous move.

That is what RIMM appeared to be setting up to do. So the ideal trade would be to put a Stop Buy Order in above the recent consolidation, so that if Big Money showed up and started to buy, you would get stopped in and go along for the ride.

Everyone and their brother saw this obvious setup, but nobody was coming in with enough volume to break RIMM out of its trading range.

Analyst Upgrade
So what does Wall Street do to get things going? You guessed it. They have an Analyst upgrade the stock overnight. This allows the stock to trade higher, triggering all the Stop Buy Orders, which moves the stock even higher, which draws in the Momentum Trades and you get a nice pop.

The problem for the buyer is that the stock usually begins trading the following morning at a price well above where is closed the previous afternoon (Red Arrow). This makes risk management difficult, because you end up buying a much higher price than you wanted to. The other issue is that there was a reason why money was not being committed to break RIMM out of its trading range!

Earnings Release
RIMM announced bad numbers last night and the stock cratered at the open today (Black Arrows).
Conclusion
I know that the markets are highly gamed right now and I don’t want any part of them.

I saw the setup on RIMM and elected to not enter a Stop Buy Order.

Do you think that the Analyst will be investigated by the SEC? Do you think he had clients who were looking to unload RIMM shares ahead of their Earnings?

These are dangerous times and you need an advocate to watch your back, because Wall Street and the US Government are out to rob you of your money.

Executing Money Management
Anybody can go to Yahoo Finance and run a Financial Planning Model showing how much money they need to make each year to finance their goals, but few have the skills to execute the day-to-day money management required to achieve the desired returns.

To put things into perspective, here is what one of the Hedge Fund guys I follow wrote yesterday –

“It is nice to be in a Secular Bull market and just sit back and Buy & Hold, but unfortunately we are in a Secular Bear market until probably 2017, and the bull and bear cycles will be more like the 1970's, so market timing takes precedence for all but the young.”