Investors Unhappy With RIMM's Quarter

So far the after hours trading has been ugly after Research in Motion released their latest numbers.  We are selling half the position into the after hours market (currently trading at 70) and will hold the other half to see if any dip buyers come to the rescue tomorrow.  

We would have liked to see a big pop out of this one to close the overhead gap, but we're happy to exit the failed trade just below break-even.  Protect your capital and remember there will always be another opportunity.  If we see a big reversal tomorrow we'll be right back in this one.

A Spring Review of Breadth

It's been a while since we recapped the handful of market breadth indicators we follow, so let's see where they stand:

The NYSE BPI is technically still in a bear correction, but we are just a few points away from reclaiming bull status.  Even though we're in a bear correction we are still at very high (bullish) levels. 

The Nasdaq BPI on the other hand is in full bull mode and looks very strong.  It has also given us a clear warning level around 58.  When that level is breached you will want to make sure you take a defensive posture with your portfolio.

The Advance-Decline and High-Low indicators all look exceptionally strong and suggest this market has further to run on the upside. 

And last but not least we have the number of stocks hitting new highs, which hit a new rally high itself just last week.

Overall the market internals look promising, but the markets themselves are significantly overextended at this point and some consolidation is in order.  Any dips without confirming weakness in breadth should be considered buying opportunities.  Until breadth decides to take a breather or rollover, odds are very much in favor of the bulls.

IMAX: It's about time someone took some profits!

With the run this stock has had from the mid 2s at the end of 2008 to nearly 18 at the high of today's session, prudent profit taking was in order.  The quarter looked great and the 3D IMAX story is just getting started, but it may finally be time for the stock to take a breather and consolidate it's massive gains over the past year.  This will be an excellent time to accumulate a sizable position in advance of the next leg up.  

RIMM Warning Signs

When a good stock gets left behind in a strong rally it's cause for concern.  Due to RIMM's lack of participation in today's rally we're going to lighten up our position in this trade and suggest you do the same.  Today's action may just turn out to be a hiccup in the expected uptrend, but consider the selling a form of insurance against the possibility of real weakness.  If the stock catches some strong bids over the next few days we'll be right back in there with a full position.

For an example of how a good stock should behave in a rally like today's, take a look at Apple. 

As Goes Apple, So Goes The Market? Or Is It...

... as goes the market, so goes Apple?  If you think you've got the answer, glance at the chart below and tell me which one is Apple and which one is the S&P?  Make it quick!

Got an answer?  If you study the charts you'll be able to tell which is which, but doing so in a split second glance is a challenge.  Apple is the yellow line and the S&P is the blue line.  

The answer as to which one is in the driver's seat is a little bit of both to be honest.  Individual stocks and sectors cycle through leadership roles and help lift the broader market by giving investors a bright spot to be hopeful for.  The broad market averages have a chokehold on sentiment though, and scared investors hate to buy just as hopeful investors hate to sell.

The investors that bought Apple at the bottom of the bear market back in March probably feel like geniuses for the grand slam return they've made the past year.  But are they smarter than the investor who simply doubled up a long bet on the S&P and forgot about the individual stocks?  Where would Apple have gone had the market not rallied so strongly and likewise, where would the market have gone if not for Apple providing excellent leadership for the tech sector?  

We can all make educated guesses but we'll never know the right answer.  Just use this as a reminder never to invest in a stock without taking the market averages into consideration.  Stocks are rarely as independent as you'd like to believe, despite all the investment advice spewed daily arguing in favor of the point.