SMB caught a nice trade in RIMM on the Open.  We used an intraday support level from Friday to start a core long in RIMM today.  Let’s discuss.

RIMM finished up over twenty percent on Friday.  RIMM had trouble trading above 60 into the Close but still finished impressively.  During the midday 58.50 was a huge level on Friday.  This level, 58.50, was violated only temporarily when the market was weak on Friday.  This move through 58.50 looked more like a shakeout.  And RIMM did not trade below 58.31 on Friday during this temporary move below 58.50. Then RIMM reheld the 58.50 level and traded towards 60, where it failed.

So we learned some important trading levels last Friday for RIMM.  60 was resistance.  58.50 and 58.31 were support.  The market opened negatively and RIMM opened lower.  RIMM opened below the 58.50 level, traded below 58.31, so I got short.  I noticed too much buying at 58.25 and 58.20.  If RIMM was weak it would have traded down quickly below the 58.31 level.  It did not.  There was buying at 25c and 20c.   There especially was some buying at 58.20.  There was significant volume at 58.20.  The 58.20 level held.

For new traders this can be a tricky trade.  RIMM is below 58.31, the support level.   Almost always we do not get long below support levels.  But there was significant buying just below the support level.  I flipped my position and started a core long position.  RIMM opened lower mostly because of the market.  RIMM was not trading weakly below the support level.  Significant volume was done at 58.20 and that level held. This is what an intraday bottom can look like.

This is a great example of why learning how to trade is most important when you begin. Learning how to read the order flow teaches us that the move below the support level, 58.31, did not signal a true breakdown.  There was too much buying below the support level.  There was a held bid just below the support level.  The short time period RIMM traded below the support level gave us pause to trust a break. So we got long. Now remember RIMM was exceptionally strong on Friday.  Stocks after days like Friday tend to trade much higher.  You ought to expect another few strong days from RIMM after its exceptionally strong Friday. And this temporary dip below a support level on the Open, with a held level, with significant volume, is an opportunity to start a long position.

Also, RIMM is a stock that we can all understand.  The Blackberry is an awesome product that many of us use.  This is an easy story to understand as an investor.  RIMM is one of the top five technology companies. Top companies, with easy stories to understand, get bought by many investors.   With good news, hedge funds, mutual funds, and the big banks want to own this stock.  And I did.  And others on our desk did as well.

60 was our next resistance level so I lightened up in front of 60.  60 did not offer much resistance today so I reestablished a core long position.  I lightened up near 62.75 into the close as this offered resistance.  I reestablished above 62.75.  I held my core into the Close where I exited at 64.  64.25 is resistance as I write.  I will watch for a hold above this level tomorrow.  RIMM has shown us no evidence as of yet that the top is near.

Best of luck with your trading!