Don't let yesterday's price action (or the new ticker symbol, changed from Research In Motion's RIMM) fool you, BlackBerry (BBRY) is still the same stock it was last week. The $6.8 billion cell phone maker spent most of the last year in a downtrend, dropping like a rock as competing handsets shoveled market share away from the firm. And even though the oversold stock bounced hard in the last quarter, it still looks toxic at this point.
That's because BBRY is currently in the early stages of forming a head and shoulders top, a price pattern that indicates exhaustion among buyers. The head and shoulders is formed by two swing highs that top out around the same level (the shoulders), separated by a bigger peak called the head. The sell signal comes on the breakdown below the pattern's "neckline" level, currently at $11.50.Momentum, measured by 14-day RSI, had been in an uptrend following this stock's lows back in the Fall -- but that uptrend broke at the turn of the new year. Now momentum is trending lower. Since RSI is a leading indicator of price, that doesn't bode well for BBRY. This is still a volatile stock, and it's likely we'll see big swings in both directions for a while now; if the neckline gets broken, though, look out below.
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