Adam Hewison of Market Club released an intriguing video discussing pairs trading and the ‘battle’ between Research in Motion (RIMM) and Apple Inc (AAPL).
(Clicking the image takes you to the Adam’s video page)
Entitled “Battle of the Titans - Apple vs RIMM,” Adam takes a moment to discuss the Blackberry vs the iPhone, then moves into discussing their charts (along with relative strength), and finally discusses a possible “Pairs Trading” strategy. Most new traders never think about Pairs Trading and that’s fine, but some traders are instantly drawn to it due to the lower risk it offers.
Adam introduces the video by saying:
“It is the battle of the tech titans as both RIMM and APPL battle for the smartphone market share. Although Research In Motion is a well established tech giant as the creator of the BlackBerry, they may have hit a wall with Apple, Inc.’s launch of the phenomenally popular iPhone.
This tech battle may create a way to trade these markets with a lower risk. During this latest rally, RIMM did not perform well, nor were the changes in price as exuberant as the shares for AAPL.
I am looking for the general market to show weakness through the next week… with that said, I expect to see RIMM slide faster than AAPL. It may be conservative trading strategy to buy Apple and short Research In Motion. Take an equal amount of money for each market and buy a corresponding number of shares to balance the positions and decrease risk.
This is what I call “pair trading.” You’re looking for the percentage change in the market between RIMM and APPL to move in Apple’s favor no matter which direction APPL or RIMM head.
In my new short video, you will learn why I came up with this strategy and why it may offer a low-risk trade in the current market environment.”
As always, thank you to Adam and staff for these educational videos and the lessons we learn from them.
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