Every Battle is Won Before It is Ever Fought

Sentiment Analysis of RIMM

As I was taking the A Train home, I found myself asking if I would still own a Blackberry if it wasn't company issue and had to buy one at my own expense. The answer was YES! The question lingering in my mind was if millions of others felt the same way, given the bleak financial outlook and decreases in corporate spending. It occured to me that my Blackberry was no longer a luxury item for me but transformed into a necessity over the months, just like how cell phones were viewed back when they were first introduced. This seems to be the common view when I ask my friends and co-workers.

So Nomura’s analyst calling for a earnings disappointment is understandable. I also assumed that last week when I was short, trading the technicals without paying much attention to the numbers (as I often do when the CC is far off). After doing the DD/research later in the week I had to come to the conclusion that RIMM will blow the doors off earnings expectations and the short story was no longer intact, at least ahead of earnings week. What did I do? I flattened my shorts as soon as a decent profit arrived (Thursday). Researched on Saturday and was long by Monday. With supreme conviction. Why? Because when a thesis evolves then the trading action has to follow suit FAST, especially when the thesis is about a catalyst right around the corner (ER). Letting any position dictate your thesis is backwards. That is called hope - A FOUR LETTER WORD. I form a thesis, then take a position. During that time if material adverse conditions occur to change the outlook, THEN I MUST RE-EVALUATE MY THESIS, and take the appropiate trading action. Sometimes this happens in minutes (daytrades), sometimes it happens over several days (swing trade). Many are confused by this because it makes the trader seem incongruent, flaky, or duplicitous. Total BS.

You MUST be flexible to trade a stock according to its harmonic swings and other factors that comes to your surface. I am not just referrring to fundamentals, but also to macro concerns, technicals, and sentiment factors that create a confluence. Not to mention the sharks at GS and Fidelity. This is the where the art of trading comes alive by way of mosaic not fundamentals alone or the numbers. Much of that gets discounted before it even hits AP - that is public information flow, which is always second hand and delayed.



Fundamental Analysis of RIMM

Okay, let's do the dirty. Many are expecting inline Q4, with Q1 guidance expected to be a suprise above what the Street is expecting. That is the call RBC made and after looking at the projections, I agree for the most part. But I think guidance will be what sends RIMM soaring before AND after the announcement. The Street is expecting revenue guidance under $2B and RIMM will suprise and deliver higher than that. Trust it. EPS should be solid as well and will got out on a limb and say that they come in at .84 instead of the.74 the Street expects. Those recent suscriber forecasts seemed very impressive, and rumor on the Street is that those too will come in on the high end.They seem to have everyone thinking they will come inline and THAT is just what we want going into ER. As a result, I already KNOW that RIMM will beat the Streets expectations. But how the trading desks and hedge funds respond is of MORE interest to me. That is what homegamers ultimately trying to game. You should also know they are also gaming YOUR move (consenus strategy). Since RIMM has a pattern of running up in the days before (pre-announcement) and selling off the days following the announcement. Many of shorts will "go Pavlov" and enter shorts on WED AND THURSDAY thinking this pattern will repeat, with a selloff on announcement. IT WON'T.
THIS IS NOT GOING TO UNFOLD IN A SELLOFF THURS OR FRI BUT RATHER A RALLY INTO THE WEEKEND. I DON'T EXPECT A SELLOFF THIS TIME AFTER THE RELEASE OR THE DAY AFTER. INSTEAD I EXPECT THE REACTION TO BE AN ACCUMULATION FRENZY, PUSHING THIS TO 130 BY FRIDAY. Sure there will be a little profit taking post announcement but we will see 125 WED (pre) and 130+ by FRI (post) as I was told last weekend.

Happy Trading,
Cash

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RIMM vs. Apple

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