Trade of the Day: BlackBerry (BBRY)

Advertisement

As I’ve noted in recent InvestorPlace posts, the bears require watching, and they made another attempt at cracking support on Wednesday, as the indexes tested fresh lows for the week. However, the bulls continue to hold a strong base of support that has formed in recent weeks following the continued run to all-time highs.

The blue-chips on the Dow spent their second-straight session underwater and tested a low of 18,029. Support at 18,100-18,000 held, but the close below 18,100 was slightly bearish, as it snapped an eight-session stay above this level. Additional support is at 17,800-17,600 if the action gets ugly. Resistance is at 18,200-18,300.

The S&P 500 stayed weak throughout the session. I was cheerleading for a hold above the 2,100 level for the ninth-straight session, but that failed to materialize. The close below this level gets 2,075-2,050 in play on continued weakness. Resistance is at 2,100-2,125.

The Nasdaq struggled on the open and kissed 4,938 but showed continued improvement on the rebound during the second half of trading. The index failed to make it into positive territory and hold 4,975-4,950 on the close and session low. There is additional risk to 4,925-4,900 on another dip below 4,950. A recovery of 4,975-5,000 would be a bullish sign.

The Russell 2000 fell 3 points, or 0.3%, to finish at 1,231. The small-caps were also shaky at the start after trading to a low of 1,224. The bears stretched near-term support at 1,230-1,225 by a half of a point, but the bulls held the upper end of this zone for the 12th-straight session. Resistance is 1,235-1,240, with additional upside to 1,250-1,260 if the latter is cleared.

The S&P 500 Volatility Index ($VIX, 14.27, up 0.37) tangoed with 15 after reaching a peak of 15.33. The bulls held 15 into the closing bell, but it could be a “yellow light” to lighten up on bullish positions, which is part of the reason I recommended that my InvestorPlace Momentum Options members take a smaller-than-normal 43% win in our TiVo (TIVO) trade.

But I won’t get nervous until the VIX clears 17.50, and I might flinch at 20, but otherwise I’m staying relaxed despite the spike. A close below 13.50-12.50 today or ahead of the weekend would be a bullish sign again.

Support has been holding up, which is why I continue to open “longer-term” bullish trades that I’ve shared with you on InvestorPace, despite much of Wall Street begging for a 5%-10% pullback. I have also been trading stocks I am very familiar with and ones that are showing momentum.

Being on the outside looking in has been frustrating for the suit-and-ties and, if the bulls can make it through this week, the “smart” money might have to start chasing.

This does not necessarily mean that the current market environment will be smooth sailing, but I’m still holding out for my upside targets to trigger before worrying about a correction or 5%-10% pullback. Still, I’m focusing a lot on stocks that I’ve watched for a decade or more, and one of those names is BlackBerry (BBRY).

Earlier in February, I brought you a potential earnings play in BBRY. Today, I’ve got a simple way to trade a near-term move upward.

Shares are showing momentum, and I like these call options at current levels. Besides the improving technical picture, the company’s announcement that it would be working with Google (GOOG) last week was a clear indication of who might be the eventual buyer of BlackBerry.

It was recently announced that Samsung and BlackBerry will be teaming up for their launch of the Samsung Galaxy 6.

These recent collaborations make Google or Samsung the clear front-runners for a possible acquisition, and I have mentioned that BBRY shares could fetch $20 in a takeover offer this year.

Google or Samsung could probably get a deal done for $15-$17, and a marriage during the spring season would be a nice way to get M&A activity heated up. Without an acquisition premium, shares still look strong and appear to be headed to $12-$13. Support is at $10.75 was tested following yesterday’s dip to $10.71. Resistance is at $11 over the near term.

Buy the BBRY June 13 calls at current levels around 55 cents.

My exit target for the BBRY calls is $1.20. I do not have a stop loss in place at this point. I’ve mentioned before on InvestorPlace that I tend not to use stops on options that are below $1.00 because the volatility can be strong, potentially knocking you out of good positions too early.

 

InvestorPlace advisor, Rick Rouse, is offering a special free report, “The 5 Golden Rules of Options Investing,” that reveals his rules for options trading success that will help you make double- and triple-digit profits in the months ahead no matter what the market has in store. Just click here to read it right now. 

Whether you’re new to options or have years of experience, the tips Rick will share can help you lock in bigger gains, find new winning ideas, wring the risk out of your trades and become a more confident and successful options investor.  Click here now to download your FREE copy of The 5 Golden Rules of Options Investing


Article printed from InvestorPlace Media, https://investorplace.com/2015/03/trade-day-blackberry-bbry-3/.

©2024 InvestorPlace Media, LLC