RealNetwork Inc. (RNWK) – Technical Upgrades vs. Institutional Downgrades

So what happens when you get a big conflict of interest between a large financial institution like DA Davidson and a clear technical breakout from an ascending triangle? This was exactly the issue that I ran into on Friday with RealNetwork Inc. (RNWK). RNWK was downgraded by DA Davidson from Buy to Neutral at the same time that it tried to breakout from a nice 7-month ascending triangle base. The result was huge volume and an intra-day struggle between DA Davidson followers and technical traders.

I am going to be honest and mention that this is a situation that I have never traded before. A stock torn between downgrades and technical upgrades. This is a situation where tight stops will need to be slightly looser to account for the natural volatility the stock price will see as RNWK tries to make up it’s mind over the next week or two here. Volatility is something that I have learned to embrace, expect and invite.

My bet is that there are more people technically trading this stock than there are followers of the DA Davidson downgrade and thus the stock goes higher but maybe not as high or big of a breakout as I had initially expected. Don’t be surprised if you see a throwback here as the stock tries to decide where it is going.

What do you think of this current struggle between the technical and institutional investors of RealNetworks Inc. (RNWK)?

UPDATE (Nov. 6th, 2006): Resistance looks to be holding and if the stock is going to bounce it is going to do so here. A text book throwback DID occur as expected providing another opportunity to get in at a discounted price. RNWK is also currently oversold here and due to report earnings after hours tonight. Look for a good coming week here for RNWK as the uptrend proves to still be well intact.

Investor Term of the Day: Currency Risk
The risk that a business' operations or an investment's value will be affected by changes in exchange rates. For example, If money must be converted into a different currency to make a certain investment, changes in the value of the currency relative to the American dollar will affect the total loss or gain on the investment when the money is converted back. This risk usually affects businesses, but it can also affect individual investors who make international investments. Also called exchange rate risk.

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