How to Play RIM Earnings Today

Technology earnings kick into gear tonight, with Research in Motion [RIM:TSE][RIMM:NSDQ], makers of Blackberry smart phones, reporting results after the bell. According to analyst estimates, RIM is expected to earn $1.28 US in their 2010 Q4(RIM reports in US dollars although is a CDN corporation). Last year, they blew out estimates. Christmas season seems to be a very profitable one, but has the stock's recent gains and upgrades already priced in a predicted beat? In the US, the stock has risen from $60 to almost $75. Now, to be fair, about $10 of that move was foreign exchange related, as the Canadian dollar strengthened against the US dollar. But where do I think RIM will go after-hours? I do not see it moving up more than the $80 calls are worth. Apple and Google have taken market share, and reports shown in the last week indicate that Blackberry users are willing to give up their "BB" in exchange for the iPhone or Android. It looks like we could see a sell on news kind of day for RIM. The options are pricing in a move of about 4 per cent. Normally, I would short both the call and the put the day before earnings to capture the volatility of earnings. The 75 calls and puts are about $3.50 each. A short straddle could pay you $7.00 ($700 each). All the stock has to do is move less than 8 per cent this afternoon and you will be raking in the dough. If you don't want to waste commissions on closing one side of the leg, consider writing the 80 call and 70 put, which I think is a better trade anyways. They are both about $1.65 ($330). You are covered more on this trade and you are only sacrificing half the potential profits. So as long as the stock remains between $70-$80 by April 16, you can buy me a nice steak dinner.

First Quantum (FM) Trading Opportunity

Yesterday afternoon, I contemplated shorting Quantum Minerals [FM:TSE] because it had such a huge run, but I decided not to, because I am not a fan of going against momentum. By mid-day trading today, the stock dropped more than $6 or 6.5 per cent on two pieces of news. Sometimes you just gotta go with your instincts... This morning, the company announced a legal update to its mine in Congo. In usual fashion, the wording is vague, but it seemed like the system was not in favour of the company. First Quantum also informed share holders today on an update on the Kanshashi copper-gold mine in Zambia. The problem with these reports is that they put a spin on it, and for the average person, like myself, these tables, charts, and figures can be confusing. However, some key words can be found in the report that emanates negativity, which can be found in the "notes" at the end of the report. "1. There is less geological confidence associated with gold, which is due to the smaller data set plus the sporadic or "nugget" occurrence. 2. Based on the historical production of gold at Kansanshi, it is necessary to include it in the mineral reserves to allow effective mine planning, design and scheduling. However the reduced level of geological confidence should be acknowledged." Strip ratio also increased, which many consider negative as it decreases the likelihood of open-pit mining. So, what does this really mean for traders? It might be time to short the stock. The streaming chart, courtesy of BigCharts has shown us three technical indications that the stock will continue to fall. First, the most obvious one: the trend line has been breached, and on strong volume too. Second, both the lower indicators I use have gone negative. The Moving Average Convergence Divergence (known as MACD) have shifted into negative territory. The MACD 12,26 has increased above MACD 9, that is, the red line has gone above the blue line. Finally, the Directional Movement Indicator (known as DMI) have crossed into negative territory. This occurs when the negative DMI crosses north of the positive DMI, that is, the red line goes above the blue line. When trading, I never buy or sell when only one of the two lower indicators signals, but both. Good to see that they both crossed today. The stock doesn't have much to fall, but maybe try to catch a few dollars on the way down. I would like to wait for the Bollinger Bands to also increase in range or start trending downwards for a longer-term shorting opportunity. For now, I would say short it until it reaches $82 and buy to close. Note: Toronto Stock Market requires shorts to be filled on an up or even tick.

Inmet Mining (IMN) Trading Opportunity

I just realized it's been a while since I last brought up a trading opportunity, so here's one that recently caught my eye. Inmet Mining [IMN:TSE] has been a stock that my friend trades often. The stock has generally been trading between $55 and $60 since the middle of January. Today, the stock closed at $55.69, very close to that $55 support. Unfortunately, I do not have market depth/level II quotes so I can not see how many shares were at that level today, but I suspect there will be a lot. The reason I believe this is because $55 is also the approximate value of the 200-day moving average as seen in the 3-month chart below. (Note the chart is directly from bigcharts.com and will change everyday, as this is a streaming chart and not a print screen.) The lower Bollinger Band is also near the $55 level. The only concern I have are the MACD and DMI lower indicators. They seem to be showing a negative sign, and it is possible that $55 will be broken with ease and continued selling could continue. However, I am willing to take the chance it will bounce up from $55. If not, consider buying a put to protect your losses if it starts to fall. I have personally bought a few hundred shares in hopes that my prediction is correct. If not, I am willing to own the stock for a few weeks if required, since this company is one of Canada's largest 60 public company.

Ideals of Humanity Should Over Rule

Today, US Congress praised Google for their actions on leaving China. I was under the impression that the majority of people had the same beliefs, until I read many of the posts on CNN's story. To my surprise, there were many people opposed to what Google was doing, with many angry at Google's supposed attempt at world domination. I wrote the following post on my Facebook link discussing my belief that Google did the right thing. "Congress, although they do have more important issues to work on, did the right thing. People need to see the bigger picture here. Congress is supporting a US company going against the grain by sacrificing huge market share and profits in China for their company's values, morals, and integrity. Google is standing up for what they believe in. Many conglomerates stands up for their employees and ideals by choosing to donate to great charities, bettering the environment, and providing aid to Third World Nations. These countries are often praised for their work, yet when Google just leaves a country, without breaking any laws, they are shunned? That is absurd. Anybody who shuns Google for leaving China has no idea what they are talking about. Google did not disobey any laws while they were there. And the fact that the Chinese government supposedly hacked their systems to oust or obtain Human Rights Activists information is itself illegal, at least in North America. People often disassociate corporations and human beings. Do we need to remind people that corporations comprise of hundreds or thousands of employees? I believe it is fair to say that a large majority of Google staff, along with the rest of world, would like to see Freedom of Speech imposed positively in every nation. The ideals of democracy are taken for granted here." Those who do not support what Google has done should provide me with a strong argument for your side. I believe that any company should do what they believe is best for them. Money may be a big factor in business, but it is not the only thing now. If you opened up a company in a country and found out they were hacking your systems or stealing from your warehouse, would you honestly consider staying in that nation? I hope not. Your beliefs should trump money. Christine Jones, executive vice president of GoDaddy.com, also told the commission today that China had asked for copies of photo identification and signatures of all registrants to their website. Privacy is an important matter to Americans. How can one argue for China in this situation? Google is clearly standing up for the Freedom of Speech and Information. To be fair, there are 25 countries that block Google, and 40 censor the Internet. Now that a precedence has been made, Google should continue to spread this into other natinos as well. But regardless of the laws in China, they are doing what they believe is right. Would people be angry if Google donated millions of dollars to Cuban aid relief if there happened to be a natural disaster? The US does not trade with Cuba, but that should not stop people from believing in humanity and caring for others. I for one am glad to see Google become the poster-child for Human Rights in China. This may be controversial, but China has become obsessed with growing their country with greed, with a lack of care for human and environmental rights. Those that built China into a super power in international trade will leave and subsequently submerge China back into the last century.

Boston Bruins the key to the East Playoffs

There's just a dozen games or so left for each team, and bubble teams know that they must make a final push for the playoffs. Any team that can put together a win-streak of five games from this point on can almost guarantee a ticket to the post-season. As well, teams that take advantage of the "four-point" games will clearly earn the spoils of victory. Last week, the four-point story was between the Detroit Red Wings and the Calgary Flames. The two teams would battle for positioning for the 8th and final place in the playoff standings, with the Red Wings capturing a 2-1 victory over the Flames. With that win, Detroit has just a two-point lead over the Flames, and at the end of the season, if Calgary is out by two points or less, they can easily argue that this game was literally a season-changer. These games prove so critical that an 82-game season can be determined by one game. This week, the story moves east to the US Northeast, where the Boston Bruins, currently holding down the final spot in the playoffs, face the three teams directly below them in the standings: Atlanta Thrashers, New York Rangers, and Tampa Bay Lightening. The team just wrapped up a media-circus of a game against the Penguins. A few days back, Cooke knocked out their star player, Marc Savard, who has the best points-per-game average on the team. The team was looking for revenge. Now that this game has passed, the team must refocus on winning games and making it to the playoffs. The final eight teams, including the Carolina Hurricanes, the New York Islanders, the Florida Panthers, and the Toronto Maple Leafs are all separated by just ten points. Let's not forget how poorly the 'Canes and the Leafs were before the trade deadline, and suddenly, the playoffs are actually attainable. The Boston Bruins control their own destiny here. The team will face every team, except the New York Islanders at least one more time in their final dozen. Simply put, win these four-point games and no team has a chance at catching them. Lose even just three of the six, and the Bruins will miss the playoffs (yes a bold prediction). It also doesn't help that the other five games are against the Buffalo Sabres, the New Jersey Devils, the Washington Capitals (twice), and the Calgary Flames. The first three teams are leading their respective divisions. As a prediction, Boston must win five, that's right, five of these six four-point games to make the playoffs. This will prevent them from having to win against the best teams in the East and prevents the chasing teams to gain any ground. It is clearly too early to tell, but the final spot for the playoffs might come down to Saturday April 10, where Carolina and Boston meet to finish their season. Carolina, who was the worst team in the league before the Oilers crashed and burned, is now one of the hottest teams in the league. This team has captured a lot of momentum and recently had an 8-game winning streak, propelling them into a three-way tie for 11th, and just 6 points (3 wins) back of Boston. Atlanta has also put on a mini-streak recently, currently with three consecutive wins and only behind by one point, although with one more game played. These two teams will meet Tuesday March 23, but prior, the Bruins will play the Rangers Sunday March 21, and the Thrashers will face the Flyers on the same day. Normally, I do not follow the Eastern Conference races. It has never been this exciting, especially since Southeast Division teams are so far behind, but this year, it is hard to believe that all fifteen teams may be fighting for a playoff spot by April 1. This is the best drama any hockey fan could ever dream of.

Reader Request - Black Box Trading

A reader of my blog, (JJ) who I would like to thank has taken time to read at least one of my posts, brought up a request for me to write about Black Box Trading and Statistical Arbitrage (Stat Arb). Now, I must be fully honest, my level of understanding under these two techniques is limited so I did a lot of research for this blog. I only dealt with a type of Black Box Trading once while working. It was primarily an "iceberg" trade. Black Box Trading, properly known as Algorithmic Trading, is the use of computers to enter buy and sell orders in the equity markets through electronic triggers. For any reader who was interested in starting up Black Box Trading, you may already see the first hurdle. This style of trading is commonly used by hedge and quantitative funds because they manage millions or billions of dollars in assets and have the practicalities of capturing small movements in regular trading. It may be used to enter orders before information has been fully received by human traders or to create liquidity by market makers. It may also be used to "iceberg" orders, a technique used by firms who require to buy or sell a large quantity of shares but want to limit market impact, thus divide the orders into smaller units and prevent volatility. The idea that one program can run a successful Algorithmic Trading style for many years is also false. According to an online post, the systematics of setting it up is enormous. The steps in the link will be costly, which present a second hurdle for start up for retail investors. The author of the post also points out that a regular PC does not have the capabilities to handle these tasks. Algorithmic Trading has also been quite controversial. High-Frequency Trading may require Black Box Trading systems and accounted for almost 75% of volume in the U.S. Markets in 2009. Many blame High-Frequency Trading for the volatility and crashes of 2008, as computer models sold off large quantities of stocks as markets and indices would touch key order entry levels. As these key levels were breached, computers would sell and eventually reach more key order entry levels, creating more selling by computer models. I could continue further with more points in my research about its advantages and disadvantages, but my main point throughout this blog was to inform my readers that Black Box Trading is not realistic for retail investors. JJ also wanted me to write about Statistical Arbitrage, but again, it requires a lot of data mining and is not practical. To quickly summarize Stat Arb, it requires a trader to purchase and short many securities (sometimes hundreds) in the same sector, region, industry, etc. This is done to eliminate beta, which is a numerical value that measures a stock's relative return against the market (A beta of 1 means the stock moves almost parallel to the market. A beta of 2 means the stock moves double the market. Negative beta occurs when a stock typically moves in the opposite direction), and other risks. Once this is done, the trader may go long the basket that is under performing and short the basket that is over performing. The theory is that stocks under performing will catch up to the rest of the market, and vice versa, and hopes that the profit on one side is better than the loss on the other side.

Economic Recovery Imminent

March 9,2009: The world's financial barometer, known as the stock market, would reach multi-year lows and all signs pointed to the Apocalypse. Major financial companies, such as Bear Sterns, Lehman Brothers, and Merril Lynch were all wiped off the face of the earth, and many other firms were close to bankruptcy as well. It took a huge bailout to save the rest back in the fall of 2008. Signs of a second Depression were here. Fast forward to March 9, 2010; there is emerging hope that an economic recovery is on the horizon, with many indicators already showing improved figures, such as retail sales and GDP growth. The markets in Asia, Europe, and Americas are now up at least 60 per cent since the fallout and investors who sold a year ago are grieving at the missed opportunities everyone knew existed. It is hard for the average person, especially in America, to see that a recovery has been in the works for nearly three quarters, with jobs still unattainable, income being slashed, and so much negativity all around, but the signs are here. When Obama took the reigns as President, he inherited a mess of an economy, and give him credit, he has made many controversial decisions which seem to be helping. Many people denied the economy would ever recover and that it would take years. However, those people discounted one major difference today compared to the Great Depression: The world is much more global and China and India are now major players in the world. I've written a few times since I started my blog that things are looking good. Rising commodities alongside a rising US dollar is a very strong indicator. GDP is up, manufacturing data positive, retail sales up, job cuts down, and just about anything else looking a little better. Although jobs have not yet been created to substantially reduce the unemployment rate, we have seen signs that employers are ready to invest in human and technological resources. To my readers who are in a bit of a rut, be patient. I may not have been alive for the Great Depression nor old enough to remember the Asian crisis, but I know that humanity never changes and history always repeats. Keep a positive outlook and have confidence in who you are. Retail sales will jump start hiring and I predict this will happen in the summer. Yes, it is a while away, but this is a slow recovery that requires human endurance. The strong will stick through it and have something proud to talk about. Monitor major leading indicators to stay informed. Pay attention to the stock market trends, consumer expectation reports, and housing permits. Remind yourself that employment is a lagging indicator and generally lags the economy's state about two or three quarters. The recession was considered over, by definition, at the end of 2009, so hopefully we are halfway through the lag.

Is Wayne Brady Racist?

Last fall, when I heard "Let's Make A Deal" would return, with Wayne Brady to host, I was ecstatic. Ever since "Whose Line Is It Anyways?" Brady has been one of my favourite television celebrities. The show itself is a re-make of Monte Hall's classic with a theme of audience members dressing up to win money, cars, trips, and furniture. But as I started to watch the show on a nearly daily basis, I noticed a common trend: The contestants were most often African-American females. Now, with Brady being African-American, I understand he may be more subconsciously inclined to choose contestants with the same ethnicity, after all, I am Asian-Canadian and attract myself to Asians as well, but the large difference was something I could not ignore. I went on the Internet to see if any other viewers made the same observations, and stumbled on a forum thread on Wayne Brady's Website. In the thread, the author provides evidence that Wayne Brady may be unknowingly racist. The author taped the last 14 episodes of the show prior to January 25, 2010 and noticed a startling statistic. "Wayne [chose] blacks and other ethnic groups (per capita) 92% of the time over whites," the author writes, "[W]e started counting the number of whites per blacks sitting on the program and he nearly every time chooses the blacks over the whites 9 to 1. (Per capita) Not only that, but when there is a CAR or Major prize involved, it is ALWAYS offered with the best odds to the black race!" One contestant on the show also offered support of this belief and posted the opinions of many hopefuls in line hoping to get tickets. "[E]veryone standing in the line the day that I was on the show was buzzing about how if we were black we'd have a much higher chance of getting picked for one of the good prizes." The show has received numerous boycotts from many viewers and the seemingly blatant prejudice has not yet stirred any controversy, but with more and more people having the same opinion, and the show celebrating its 100th episode today, we may see some major changes to the show in the near future. CBS has built a reputation on quality programming and is now number one in America. I am certain that CBS will make alterations to appease viewers. Keep the host; change the contestants system - Maybe a lottery system, like "The Price is Right."

Drivers and Investors Buy Ford

February U.S. auto sales were released today with major surprises. The most predictable surprise was Toyota's drop in sales, the only automaker to have a drop. This comes on the heels of a massive recall and halt in sales of many of its most popular vehicles. But, this was not the major story that headlined. Ford [F:NYSE], for the first time in 12 years, outsold General Motors and sales gained 43 per cent. For the record, they outsold GM by only about 300 vehicles. Ford's dramatic increase in sales stems from an increase in fleet sales (rental car companies). They represented 40 per cent of the sales for Ford this month, 10 per cent higher than Ford's 2009 average. The company was hit hard during the automaker crisis, with the stock dropping below $2 a share, but when the American car maker told the government it did not need a bailout, the stock rebounded and has continued to climb to over $12. Ford has released many new popular vehicles that are better on gas mileage and are eye-appealing. With the car-buying season approaching, Toyota, GM, and Chrysler offered 0% financing for 60 to 72 months to entice buyers, but Ford did not follow suit, indicating Ford's confidence in their product. CNBC analysts said that Ford's turn around presents a good investment, with guidance of $1.00 a share, and even as high as $1.35 by some analysts. If these figures can be sustained, the company's stock price should be near $20 in the next year. Profit-taking is expected this week, but buying opportunities for long-term holders is now.

The Toyota Conspiracy Theory

A few weeks ago I was watching BNN and in the final twenty minutes of trading, they had a panel discuss an interesting topic: A Toyota Conspiracy Theory. Oddly enough, the conspiracy theory had nothing to do with the cover-up, but the highly scrutinized media frenzy that has resulted from the recall. They mentioned an article that was brought up by a USA Today columnist. Compelling might be an overstatement, but the article brought forward some interesting points. The idea of this conspiracy theory is that US Government and Detroit is involved in a smear campaign, with hopes that GM usurps Toyota and regains their number one status. Blogging Stocks posted their own interpretation of the theory and have also brought up some strong evidence. The site writes "[T]he U.S. government is the majority shareholder in two auto companies, and is charged with regulating all auto companies... a successful turnaround of the U.S. auto industry that leads to minimal losses for taxpayers is an important political goal, not just a business one." Taxpayers have been upset about the bailout of the banks and automakers for quite some time, and a positive return would definitely calm the mood. The USA Today blog also points out that both Toyota and LaHood (US Transportation Secretary) believe that the recalled cars are safe to drive, yet Toyota must stop selling their vehicles. "Imagine a drug recall where the government stops sales in stores, but doesn't tell people to throw away the bottles in their medicine cabinets." Other components of the conspiracy theory is the unprecedented coverage by the US media and the attention of the US Government. The recall actually first occurred on November 7, 2009, yet coverage did not hit the front pages until January 2010, nearly two months after. Toyota's vehicles had been halted from sales in mid-December, according to December auto sales data released. I decided to check the current vehicle recall list and was able to obtain the January 2010 report from the The National Highway Traffic Safety Administration (NHTSA) website. There are currently 30 recalls, in which ten contain the phrase "could cause death." And yes, Toyota's recall is one of the ten, yet Toyota has received a lot of heat from the media and government for something that is considered user problematic. The idea of a conspiracy is far-fetched. I'm not a fan of conspiracy theories, but the three points above do make me question the motive of the Obama administration. Is it truly for consumer protection?