Coming into the new year, BlackBerry was one of the names on my radar that I thought could double in 2014. After a monster January, shares of the Canadian mobile services company have been consolidating nicely below a declining 200-day moving average. I think there’s more upside here.
First let’s take a step back and look at this from a longer-term perspective. This is the chart that got me interested in $BBRY in the first place. Here is what I saw in December:
You can see why this is my favorite setup: the false breakdown and simultaneous bullish momentum divergence. Here is what this one looks like today:
The next chart shows the daily candles for BlackBerry shares correcting in a pretty standard flagging pattern. This seems like normal, healthy action to me, and it’s taking place at a logical level. I would look for a breakout above this pattern, which would allow the moving average to flatten out, to signal for much higher prices. I would not be surprised to see $BBRY back at last January’s highs if indeed prices do breakout:
Finally here is the relative chart comparing BlackBerry to the S&P500. We can see a similar false breakdown as the weekly price chart mentioned before. I also like the BBRY/SPY chart breaking out above this downtrend line. These are all positive developments.
So what’s the catalyst? Well, we all know that this company is a disaster. But that’s the point – it’s not a secret. Shorts think their cute trying to take advantage of more downside. I mean 20% of the float is still short. How much of this train wreck is already priced in? I would say most of it if not all of it. The market isn’t stupid.
At this point, I would want to see a breakout above this potential flag pattern. We only want to own this above its 200 day. There’s a lot of upside left in this one and it could double once again. But let it prove to us that it can absorb all of this supply first.
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Tags: $BBRY $SPY