Apple vs RIMM ... who wins? (new video)

Posted on by The INO.com Team

A little over six weeks ago I produced a video on the relationship between Apple and RIMM.

I called it the "Battle Of The Tech Titans," and in this short video I explained that we felt the relationship was changing between Apple, Inc. (NASDAQ_AAPL) and Research In Motion, Ldt (NASDAQ_RIMM). I detailed a strategy of approaching this market using a trading strategy that I call "pair trading" or "trading pairs."

What trading pairs means is that you buy one market while going short the other market in the same sector. Now Apple and RIMM are battling it out right now in the smart phone sector. It remains to be seen who is going to be triumphant in this battle but it would appear as though Apple may have the upper hand based on its very successful "APP" store.

I strongly suggest you watch my earlier video on this subject; here's the link. And then watch our latest video which I just produced.

Trading pairs is what many professionals do when they are unsure as to the direction of the general market but feel pretty comfortable in their analysis of the relationship between two stocks. I hope you find the video both informative and educational.

The video is free to watch and there is no need to register. I would love to get your feedback about this video on our blog.

All the best,

Adam Hewison

President, INO.com

Co-creator, MarketClub

19 thoughts on “Apple vs RIMM ... who wins? (new video)”

  1. As much as I respect Adam's advice and enjoy this blog it is a bit disingenuous for him to present this video as a part of Market Club. If you followed the "Trade the Triangle" approach you are advertising you would never had made these trades. Particularly in the case of RIMM the triangles would have you buy not sell -- but the video is heralding what an insight it was to sell RIMM.

    So, the question arises, should we be listening to Adam or the triangles? Sorry, with all due respect, you can't have it both ways Adam.

    1. Sean,

      Thank you for your feedback.

      I presented the RIMM/Apple video as a market observation. I happen to be a big fan of Apple and believe that there product the iPhone is going to be a very serious revenue stream for their company. In fact Consumer Reports just came out today naming the new Apple iPhone 3GS is the number one Smart phone in the world today.

      Having said that I definitely would not turn my back on the Trade Triangles. We will be releasing our results for Q2 in the next few days so you can see how well or how poorly they have performed in the six markets that we track.

      Sean, now to answer your last question about having it both ways. My personal goal with MarketClub, and that is our company's goal is to help educate traders on how markets really work. I've been around the market long enough to know that not everyone is going to want to approach the markets using our Trade Triangle technology. Even though I know they will make money using our Trade Triangles some folks just don't have the personality to do that.

      All the best,
      Adam

  2. Good points made above by readers. It looks like Adam is giving out some extras based on his own expertise. According to the rules that MC has been promoting, these trades would not have been made, both because you would have gotten stopped out on Rimm and no trade signal on aapl. So it comes down to trusting Adam's analysis - certainly if you had followed him you would have made some money!

  3. Bob,

    Thank you for your feedback.

    There was no buy signal on Apple when we constructed and put on this trade on May 14. What I was looking at was the relationship between RIMM and Apple. I expected Apple to outperform RIMM no matter which way the market was headed.

    This was outside the realm of our trade triangle technology. It was meant to introduce readers of this blog to the potential of trading pairs.

    Hope this answers your question.

    All the best,
    Adam

  4. Hi Adam,

    I just looked at your peer trade with APPL and RIMM but could not find a buy signal with Apple on May 14th per your daily and weekly green signals.

    Can you explain why you bought Apple on 5/14?

    Thanks.

    Cheers,

    Bob

  5. Nice video, however, it doesn't take one important thing into consideration. If you shorted RIMM at 71.93 and it rallied all the way to 85 or so, you must have had loose money management stops on RIMM, because at one point in the trade you would have been down almost 20%. Are you saying that you don't use any stop losses on these trades and use the other to hedge the position instead? I find that approach a little SCARY.

    Thanks,

    DaveDM

    1. Dave,

      Thank you for your feedback. Yes you're right RIMM did move higher. However during that same time frame Apple also moved higher in fact it moved significantly higher. If you are only looking at one side of the trade then you're missing the picture. What you looking for is the relationship between Apple and RIMM to change regardless of which way the markets head.

      I hope it's addresses your question.

      All the best,
      Adam

      1. Adam, reposting an earlier question as it still seems to be relevant to this discussion: Is there any way to plot the relationship between two stocks as a new, third market (kind of like EUR/USD is a market on its own)?

        1. Evergreen,

          At the present time there is not a way to grasp the relationship between two markets. This is something we expect to be working on in the future as we think it will be a great addition to the Market Club set of tools.

          All the best,
          Adam

      2. Hi Adam - I would like to learn more about trading pairs. Still not quite sure about how the relationship operates. Can you suggest some reading or perhaps elaborate for a novice. Cheers merv

        1. Meredith,

          Thank you for your feedback. In pairs you looking for one of the pair to gain or lose.

          I'm sorry to say I don't know of any books that have been written on the subject. You may want to check Amazon and see if they have something on pairs trading.

          All the best,
          Adam

      3. Thank you for your response Adam. It addresses part of my question, I understand that your trying to capture the relationship between the two in the pairs trade.

        Can you just clarify what type of money management you put in place for each trade. For example - do you place stops at all, how and where, or, do you just put the trades on and use each to hedge the other? Worse case scenario - you short RIMM and go long AAPL and the trade moves entirely against you where RIMM moves higher to 140 and AAPL lower to 89. How do you manage your risk in the trade?

        Thanks again,

        DaveDM

        BTW - great service you have going with MarketClub, I like it I like it aaaaaalot 🙂

        1. Dave,

          Once again thank you for your feedback.

          The video we created on the Apple/RIMM relationship was pretty unusual it's not our normal type of video.

          This was more of a market observation as opposed to be being a trade triangle trade. Obviously had RIMM moved higher an apple gone lower we would've been completely wrong in this observation.

          Normally in Pairs Trading you're picking two stocks in a sector. You expect that sector to either go up or go down you simply want to bet on the strongest stock in that sector and short the weakest stock in the sector in an equal dollar amounts.

          I hope this answers your questions.

          All the best,
          Adam

  6. Adam, is there any way to plot the divergence relationship between two markets as a new, third market (kind of like EUR/USD is a market on its own)?

    1. Not sure if this answers your question but it may help. Using charting tools like TradeStation for example, you can chart multiple symbols on the same chart. This allows you to visually compare the movements of one symbol/market versus the other(s) below. For example if you chart EURJPY as you mention versus the S&P or DOW, it seems to somewhat telegraph or forecast broader moves in the stock indexes and therefore could be considered somewhat of a leading indicator, at least, until such time that that relationship may de-couple. I'm not sure why this relationship exists, I've been meaning to ask someone who might know though 🙂

      DaveDM

  7. Just watched your video Apple v RIMM. Haven't seen this type of trade before. Question : if you shorted RIMM and it gained in the market,isn't that a loss situation. Bit confused

  9. Hi Adam,

    I just joined the club and watched both videos. Very interesting and profitable technique trading pair of same market.
    Is it too late to trade now? Or is there any other pair are you watching that we can trade?
    I have been watching your videos as a guest for about two months and finally decided to join the Market Club and take full advantage of it.

    Thanks for daily short videos.

    want2retire

    1. Want2retire,

      Thanks for taking the time to comment on our blog. I'm not sure I would go into this trade now with this particular pair trade. There will be others coming up and I think you'll find some of them quite interesting.

      All the best you,

      Adam

Comments are closed.