Blackberry Ltd (BBRY) has been circling the drain for years now. And yet, it refuses to go any lower, frustrating bears in the process.
And don’t think bulls are leaping for joy. No, its circuitous route to nowhere has been equally aggravating for owners praying for some type of sustainable recovery.
By all measures BBRY has been dead money since descending to the single digits in 2012.
Such mundane meandering has made Blackberry a tricky stock to trade. The last year has seen a parade of earnings losses, leaving little by way of fundamental catalysts to spark some directional action. And don’t think it has been sunshine and lollipops for chartists. The absence of any type of sustainable trend — or momentum, for that matter — has made divining direction a fruitless endeavor.
That said, BBRY’s dithering has been punctuated by the occasional breakout that has generated quick profits for tactical traders still playing in the berry patch.
I suspect one such breakout play is looming now. BBRY stock has been trading in a narrow range between $7 and $7.30 over the past month. The channel has created a clear resistance and support level to trade around.
Pick Your BBRY Poison
If you’re looking to game BBRY stock one way or the other, consider playing a breakout of its recent range. Bears should wait for a breach of Monday’s low ($6.86) to confirm a breakdown is upon us, then short the stock.
Bulls should wait for the stock to muster the strength to break above the $7.30 resistance level, then buy shares looking for continuation up towards the $8 level.
If You Can’t Beat ‘Em, Join ‘Em
If you find yourself uninspired by the pair of breakout plays just mentioned, but want some exposure to BBRY regardless, consider buying the stock and selling covered calls. That way you get paid while waiting for the stock to rise back to the upper end of its one-year range near $9.50.
Buy 100 shares of BBRY and sell the June $7 call for 37 cents. By shorting the call, you obligate yourself to sell 100 shares of the stock at $7, but are paid 37 cents for your troubles.
After adjusting for the current price of Blackberry, that 37 cents translates into about a 5.5% return. Not bad for six weeks of work. And not a bad amount of profit to extract from a stock otherwise stuck in the mud.
At the time of this writing Tyler Craig had no positions in any of the aforementioned securities.