RIMM Stock Down 15%, Key Support Established

Posted on Wed 11th Feb, 2009 04:34:42 PM

After disappointing investors by announcing that earnings will come in at the low end of expectations Research in Motion (RIMM) stock has taken a severe pounding. RIMM stock closed down 14.51% to $48.76 per share.

The stock was on a fantastic run to start the year moving from $40.58 all the way to a high of $60.47 on Monday, or 49%.

From today’s MarketWatch:

…earnings in the fourth quarter would be at the low end of its earlier target of 83 cents to 91 cents a share. Analysts had been expecting 86 cents a share, according to the consensus compiled by FactSet Research. Revenue is seen finishing “at or near” the midpoint of the company’s earlier projection of $3.3 billion to $3.5 billion.

The company said profits and gross margins were reduced by “product mix” and a higher percentage of new subscribers, among other factors. New subscribers cost more to sign up and generate less profit initially than does the sale of new phones to current customers.

For technical and short term traders seeking a value opportunity, one may have presented itself intraday when the stock bounced off its 50 day moving average at just above $46.

While RIMM momentum has turned in favor of the bears the stock could see a quick rally back to atleast $51 or higher before strong selling pressure steps in once again. What is symbolic about today’s move is the extremely heavy distribution volume which is not a good sign. Longs should beware at this point.

rimm