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Talking Heads: Cramer On 06/26 “Buy RIMM, It Was Just A Bad Day”

July 11, 2008 10:01 PM

1sheep.jpgAfter the close on 06/26, the day RIMM gaped down, Cramer said on his show to buy RIMM here, that it was just a “bad day”. Now that the stock fell another $7.34 today alone, i am guessing a “few” of his followers are a bit concerned about this “insight”. Since I like to compare and contrast his calls in relation to my opinions when we happen to comment on the same stock, let’s review what I have said.

1. After the gap lower, I said to “leave it alone” and wait to see what is going to happen.

2. I then said, on several occasions that there was “only one trade and that was short below both $124.50 and $128.98″ and that you definitely could not be long the stock.

3. I reiterated my view last night that the chart “clearly says lower before higher here” unless news and that “the probability that we have seen the low on RIMM here is extremely small, unless news.”

4. I had also “mentioned” previously that to be long against a gap lower that was sold you would be a “total moron, IMO”. Ok, that was a bit harsh, but still.

The point being, once again, Cramer had his listeners long against an obvious short/avoid long chart pattern and they are getting crushed. Could it reverse here and skyrocket? Yes. Anything is always possible. But if the chart says either short or do not be long, why even consider buying it? Even if you are a so called “long term investor, would you rather not buy a stock when the chart says long and not short?

Everyone has their own view and opinion on the market and a stock. That is why the market trades - there are buyers and there are sellers. I did not have much of an opinion on RIMM for the first few days after the gap down as I thought it was “possible” it could reverse off a low and then take out the gap high. That is why i said “let it settle here”. Once I saw that the lows could not hold and it could not take out that high, then I started to mention that the “only trade was short below both $128.98 and $124.50, or simply leave it alone”. There was no trade or reason to be long, IMO. There was strength near $122 that was no longer supported. But that is how I personally view the markets. Obviously the buyers at $122 did not agree with my “view”. Unfortunately for them, they were wrong.

The stock could reverse Monday and put in a firm low. It may go much lower, it is hard to know for sure. But why guess? This stock may not reverse for another 20 points or it may reverse in another 2. points. I have no idea either way, but I certainly have no interest in guessing on it.

If you read my “Every Investment Should Begin As A Positive Trade” article, you can see the logic in this thinking. Even if an investor, wait until the “trade” says long and the odds of having a profitable investment is far, far greater. In addition, it will allow you to sleep at night not wondering if RIMM is going lower and lower and lower when you are long at $122 when I mentioned the chart “clearly said lower”. I even said in one article “why would anyone buy here at $122 when the chart clearly says short?. I just do not get it”.

To be fair, RIMM is probably getting punished here because of the rumors surrounding the delay of their new phone. If they do not release it for the holiday season, then obviously this is a big hit to earnings. And this rumor came out after earnings. But still, you do not buy into gap downs that are sold, ever, IMO. You WILL lose most of the time, IMO. This stock has extreme risk on both sides because of the uncertainty regarding the new phone. If they came out and said “new phone to be released on 09/01″ and you were short the stock, you would likely get demolished. It could, and probably would, go up $15-$20 that DAY, maybe more. On the other hand, if they came out and said “there is a delay and the new phones will not be released until next April” you would likely see ANOTHER big gap lower. The risk here is extreme. The only thing you can do with this uncertainty is intraday trade it, if you are very good, or leave it alone. Holding overnight positions in this stock involves extreme risk whether long or short, IMO.

If you consistently buy into gap downs that are  clearly “sold” because the stock is “cheaper”, you are begging to forfeit your money. It makes no sense on any level, IMO.

 Before earnings, the chart on RIMM looked great and it looked like it was going higher. But as I have mentioned many, many times, news will blow up charts and earnings is big news, or certainly can be,  and you have to react to the news as there is a new supply and demand chart based on the news. News WILL always happen on stocks. Always. You have to react when this happens and know if you should cut your loss or not based on the new information. And you should do it quickly. Then again, I have mentioned more times than I can count that having positions into earnings on a stock like RIMM, AAPL or GOOG is gambling. So I wouldn’t have been in the stock to begin with, on either side.

I think I said last night DO NOT BE A SHEEP. Point proven again. Cramer makes many millions giving this “insight” while his listeners routinely get slaughtered, and I make pennies on a personal blog expressing amateur opinions. Such is life.

Written by Tom@StockBlade.com · Filed Under Cramer, Talking Heads 

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