Believe in a Research In Motion Resurrection

by John Kmiecik | November 5, 2012 8:19 am

Stocks, like celebrities, can at certain times be hot and at other times long forgotten. Take for example John Travolta. After Saturday Night Fever and Grease, he was one of the most sought-after actors. After a brief run, he was not seen in many films for a long time until he reappeared in Pulp Fiction, which brought back moviegoers and resurrected his career.

The same could be said of this company — and this trade idea is counting on the stock to have renewed buying interest nfrom investors.

Research In Motion Ltd. (NASDAQ:RIMM – 8.71): Long Calls

The trade: Buy the December 9 calls for 70 cents or less.

The strategy: The long call is one of the most basic strategies in options trading. The trade can profit if the stock rises and the call premium increases to an amount more than was paid. Maximum profit is unlimited because RIMM can continue to rise, and the maximum loss is 70 cents if RIMM finishes below $9 at expiration. Breakeven is $9.70 at expiration.

The rationale: Research In Motion has had its share of lumps. The stock has fallen from around $70 back in early 2011 to around $5 earlier this year. The maker of Blackberry has fallen on hard times, losing mobile phone sales to the iPhone, among others. The stock has more or less been written off by most traders and investors.

But recently, the company said its Blackberry 10 platform is ready to launch in the first quarter of 2013. The hope is that the Blackberry 10 will start to bring revenues back up again for the fledgling company.

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Technically, RIMM moved above an $8.50 area of resistance on the announcement, and it still has room to move higher. The stock now needs to hold that area. A bullish sign would be if the stock moves past Friday’s high which was $8.91.

The next area of resistance RIMM stock will encounter is right around $10.50, which is where the 200-day simple moving average currently resides.

It probably has been a couple of years since traders have shouted this, but it’s time again: Go, RIMM, go!

As of this writing, John Kmiecik did not hold a position in any of the aforementioned securities.

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