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Forecasting Earnings Reports: RIMM

|Includes: AAPL, BlackBerry Ltd. (BBRY)

The big news after the market today was RIMM's earnings report.  It has been much anticipated and discussed throughout the week.  RIMM has dropped for 5 days continuously, from above $85 to now $76.  This afternoon, RIMM reported a decent quarter, earning $564.4 million, or 98 cents per share, above the average estimate of 94 cents.  The company also added 3.8 million net subscribers during the quarter.  Its forecast came in a little below what the analysts were looking for.  Immediately after the report, RIMM shares dropped to almost $71.  Then, it recovered back to above $76, only 0.64% lower than the close.

(click on the image to enlarge)

This morning, in our Trading Room, I was asked about RIMM's earnings:
lschild June 18, 2009 9:43 AM
Happy, any thoughts on Rimm?

I responded and updated the status on RIMM throughout the day,

June 18, 2009 10:05 AM
don't think I'll be playing this; no real conviction either way...

June 18, 2009 11:44 AM
RIMM charts are reading more on the bearish side and can visit $70 if the report is not good.

June 18, 2009 11:56 AM
[...] they might just keep it at $80 and kill all the out of money june options. I think the premiums are way too high (on both sides) for where the daily MAs are [the daily MAs are basically flat with no real direction.]. Unless they report an absolute blowout, I don't think RIMM will run too high. The daily volumes have been rising on the sell side for the past 5 days! If RIMM was going to have a blowout, you'd think that somebody would already be buying...

June 18, 2009 10:06 AM
might be a better play; either way, could be good for AAPL

June 18, 2009 11:58 AM
on the down side, $75 can be easily taken out and the next support is at $70, then $65.

As it turned out, the charts forecasted the results correctly!  RIMM initially broke below $75.  When it got close to $70, it popped back, ending the after-hours session at just above $76.  Depending on how RIMM trades before the market tomorrow, I think a lot of the "out-of-money" options, both calls and puts, are going to open near $0.  And, near-the-money options are going to see their high premiums disappear!

On the other, AAPL did indeed appear to be the beneficiary of RIMM's report, trading more than $1 higher in after-hours. 

Very often, you don't really even need to study the numbers or read what analysts say before an earnings report.  If you learn to study the charts and read them carefully, they can give you a very accurate forecast before you get the actual trading reactions.  Sometimes, the trading reactions may be completely opposite to what one may expect from the report.  But, the charts usually telegraph how the reactions are going to be.  So, study the numbers, get the fundamentals, but, don't forget to consult the charts before you place your trade!

Good night and HappyTrading! ™