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Letting The Chart Talk at Trader’s Narrative

Letting The Chart Talk

I was watching Research In Motion (RIMM) because it had recently gapped up. But since it trades at the same time on both US and Canadian stock exchanges, I also compared the US and Canadian charts (technically RIM also trades on other exchanges but they are in different timezones). In any case, here’s the US version:

RIMM gap up Apr 2009

And here’s the Canadian version:

RIM canadian stock chart Apr 2009

The contrast between the two is obvious. Sure, there are a lot of gaps in RIM’s chart but the ugliest one occurred in late September 2008 and represents some serious resistance.

In the Canadian version of the chart, the current price had already bumped its head against this resistance. But in the US version of the chart, that resistance was still a few notches higher. Considering this much resistance so close, as well as the fact that prices had gapped up recently and we were probably looking at an exhaustion gap, and finally, considering that the market in general is heavy as I’ve outlined before, my conclusion was to watch for a decline if RIM broke $60.

Although I was expecting price to breakdown, it actually went up. That’s the really interesting thing here. Today RIMM gapped up (again), easily piercing the ~$65 resistance that had held it in a plateau for the past few trading sessions. Price was not only rocketing higher, it was being fueled by a massive amount of volume:

RIMM intraday chart Apr 2009

There was a textbook intra-day pattern: thrust through resistance, shallow pullback, hammer candlestick and lift-off!

So what’s the lesson? At first I thought it was to have more than one plan going into the day. But then you can’t really prepare yourself for every single contingency can you? For me, this is a lesson in humility and detachment. A great opportunity to practice both mental and emotional flexibility. When you’re wrong, you’re wrong. Don’t argue with the chart. Instead, let it be your guide. And do your best to keep up.

Interesting & Irrelevant Factoid: I remember a short presentation that the founder of RIM gave to my university class when they were still in their “garage” stage of development. My prof knew Lazaridis and he thought RIM’s product (in alpha stage back then) was so cool that it should be introduced to its eventual users. To be honest with you, I wasn’t too impressed, probably because I didn’t understand half the presentation. Not too long ago, while in town again to visit my Mom, I bumped into Lazaridis at a local book store. He’s a really nice guy, a family man, very down to earth.

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