Monday, March 29, 2010

RIMM, OCLR Broke Out... DPZ Next?

Well, buying RIMM (Research in Motion) on the breakout at $71 worked like a charm. I am still sitting on the June call options at $70, with 40% gain. So far so good, but it is being taken down AH today on the rumor that Verizon may carry iPhone. (Rats....)

There's another stock I bought recently on the breakout, and that's working too. The stock is OCLR (Oclaro Inc.), which I bought at $2.10. It is hitting a resistance around $2.80, but I am sitting with 33 gain in 3 weeks. Don't ask me what this company does for business. I bought it after looking at the chart. $2.10 was a breakout point

As far as I am concerned as a trader, when you buy a stock on the breakout and the breakout doesn't fail, then the stock market is more likely to be in a bull market than a bear market. Mind you, it's just about the stock market, and NOT the real (by that I mean productive) economy or what's going on on Main Street.

Some junk food (or comfort food, if you prefer) companies are about to break out, probably to the upside, the general market willing. One of them is PEP (Pepsico), the other one is DPZ (Domino's Pizza). Both seems to be consolidating, forming a flat top after having made a significant increase already.

I like DPZ's chart better. It has had similar breakouts from a flattish base twice since last December, and each time those breakout points were never undercut. Could it happen the third time? Looking at the longer-term chart, the stock is at the same level as in August-September 2008, right before the stock market crash. If this level is somehow taken out, the next resistance is $18 - 20 area. If it breaks down below $13.35 (lower support of the current flat base), I can forget about it.

Thursday, March 4, 2010

RIMM Waiting to Break...Out I Hope (Not Down)

I know I know you don't trade on hope as everyone says. As I wrote in the last post, the market has been stuck, listless, going nowhere fast. Today I just got really tired of waiting out to see where the market was going, and I bought a stock that I thought was setting up for a breakout. I also took it as bullish that the market so far refuses to break down. In case I turn out to be so wrong and the market crashes from now on, I will only lose money on call options, still 3 months out (June).

I bought Research in Motion (RIMM) after looking at this nice ascending triangle pattern which has been developing for the past 5 months. Technical indicators are not that great, and a beta stock like RIMM depends on where the general market may be heading. I bought on the candlestick pattern potential, not on the technical indicators.

The target of the pattern would be around $86 (height of the triangle $16 added to the resistance level of $70). That would nicely fill the gap from September 2009 when the stock totally bombed on earnings report.

Depending on the market, it could test the lower ascending trendline again before it either breaks down or goes up and test the resistance and break out. If it's the former, it would be very bearish for the stock, to break down from a bullish chart pattern.

If the pattern doesn't collapse suddenly, I may add April calls. RIMM reports its earnings on March 31.