Shares of handheld devices maker BlackBerry Ltd (NASDAQ:BBRY) rallied sharply following last week’s better-than-expected earnings report.
Just as sentiment in the stock reached extreme negative territory this past summer, BlackBerry stock began a bottoming process that, through the lens of technical analysis, took the shape of a bullish pattern.
With BBRY stock now breaking out of this pattern, active investors have defined levels to play BBRY stock from the long side.
When Blackberry reported its latest quarterly results last week, it lost three cents per share, which compared significantly better than the analyst expectations for a per-share loss of fifteen cents.
While the top line also beat expectations, what really encouraged investors was BlackBerry’s growth in software licensing. Blackberry remains far from the growth stock it once was, but this trend from its last quarter does warrant a “take notice” approach on the part of investors and traders alike.
Before taking a close-up look at BBRY, let’s take in the bigger picture.
BBRY Stock Charts
On the multi-year chart below we see that BBRY stock has really only gone in one direction in recent years — down. Bulls may point to the fact that the stock has essentially found support in the $5 to $6 area since 2012.
While that’s true and nice to know, the fact remains that BBRY stock is in a downtrend; and for a better longer-term trade to the upside, we would first need to see a better higher low or break past the upper line of resistance on the chart.
Maybe this most recent pop in BBRY was the beginning of something bigger … but the stock has much more to prove before that becomes a more viable longer-term theme.
Moving over to the daily chart we see that BBRY stock had been forming a nice inverse head-and-shoulders pattern since early this summer. The “head” of the formation was marked by the September dip, which BlackBerry stock quickly rebounded from.
After another couple of months of consolidating with an upward bias, BBRY stock looked increasingly anxious to break past its black horizontal, or neckline resistance area. Last week’s earnings report was the catalyst that the stock needed to break past the neckline.
In the near-term, BBRY may well drift higher along with the broader market, but as long as the head-and-shoulders bottoming pattern remains in place, the stock could be bought for rallies on any dips back toward the neckline, i.e the $8 area.
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