A Rounded Reversal In Store For RIMM?

Is a Rounded Reversal chart pattern in store for Research in Motion (RIMM)?  The chart appears to be setting up that way - let’s see this development and take a closer look.

RIMM Daily:

It would appear from the chart that RIMM is indeed in the middle section of a possible “Rounded Reversal” or saucer-style bottom pattern, where swings are contracting and appear to be turning upwards.  Notice the momentum oscillator has consistently been registering positive momentum divergences as price continued to make new lows.

This pattern will be confirmed if price were to cross above the falling 50 day EMA, and would further be confirmed by a bullish or “Golden” Cross of the 20 and 50 day EMAs.  More conservative traders might want to wait for that to develop, while more aggressive traders might want to enter currently.

The pattern will be invalidated (over-ruled) by price breaking through strong support at $35.00 per share, so if you decide to trade in RIMM, placing a stop beneath $35.00 or even $32.00 or so might be a good idea.

Let’s back the picture to the weekly chart to see a possible completed Elliott Wave Count there.

RIMM Weekly:

If this is the correct interpretation, Wave 1 terminated shy of $50 in late 2007; Wave 2 formed a lengthy ‘flat’ or rectangle pattern, while Wave 3 burst on the scene forming the new price and momentum high.  Wave 4 was a sharp, ABC correcting back to the rising 50 week EMA (also the while wave 5 took is into mid-2008 on new price highs that formed under a negative momentum divergence at the upper Bollinger Bands, signaling the possible peak of the completed impulse.

Corrective Wave A took us back to the rising 50 week EMA while Corrective Wave B retraced roughly 70% of Wave A.  We would technically thus still be in the Corrective C Wave, though it would appear the C wave is running out of steam at the moment (notice the positive divergence transpiring into new 2008 lows).

Continue to watch this stock, and many other technology stocks that are forming similar patterns.  Try not to get overly risk-seeking, as the major US Equity Market remains in a confirmed, large-scale downtrend.

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