Friday, August 19, 2011

RIMM Up 20% from Bottom, Garbage Effect in Play

RIMM, the most desperate hi-tech company, the loser in the the smart phone war, the orphan of the patent enclosure, rallied 20% from its bottom and stayed there when S&P 500 dropped another 5% this week. Considering it is still 65% off its May top, its latest strength is deafening. This is the so called "Garbage Effect" I wrote before. I've also predicted this to happen months ago in a tweet.

In short, the "Garbage Effect" is that a rising tide lift all boats. But garbage is lifted first than any boats, because garbage is the lightest stuff. If RIMM is rising, it means the tide is about to turn. Buy garbage to profit from the tide's reversal. Big caps and quality names will move much slower and will be lagging far behind.

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