How to Trade BlackBerry as the Stock Pops on Earnings

BlackBerry is rallying on earnings and clearing several key moving averages. Can the stock keep up the recent momentum or is it bound to fail?
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Despite the volatile day on Wall Street, BlackBerry  (BB) - Get Report was up more than 6% on Thursday.

The rally came after the company delivered better-than-expected earnings.

Coming into the report, BlackBerry had been holding up but certainly not trending higher like the rest of the market had been over the past few months. Shares were still up more than 77% from the March low, but have been about flat since early May.

The company beat on earnings and revenue expectations, turning in a surprisingly decent quarter.

Earnings came in at 11 cents a share, 9 cents ahead of estimates. Revenue of $266 million actually grew year over over, climbing almost 2% and beating expectations by more than $25 million.

The reaction has been enough to push shares over a key area, but BlackBerry isn’t out of the woods yet. Let’s look at the charts.

Trading BlackBerry Stock

Daily chart of BlackBerry stock.

Daily chart of BlackBerry stock.

On Wednesday, the session ahead of earnings, BlackBerry closed below its 50-day moving average. The move came after being rejected by the 20-day and 200-day moving averages on both Tuesday and Wednesday.

With Thursday’s gap-up, shares are now above all three of these moving averages. Even better? BlackBerry pulled back in early trading, but held the 200-day moving average as support.

This is a very key development, although it’s not the first time.

In June and August, BlackBerry stock reclaimed the 200-day moving average. However, both rallies ultimately failed near the $5.50 area and eventually lost the 200-day moving average as it failed to act as adequate support. 

With shares back above the 200-day, let’s see if BlackBerry can build some upside momentum. Specifically, I want to see if shares can climb back to $5.50 and close above this mark.

If it can, it immediately puts the September high in play at $5.66, followed by the June high at $5.84. Above both marks puts the February gap in play between $5.85 and $6. Notice how the June rally came to a halt just as BlackBerry stock approached this gap-fill mark.

That surge in June came on reports that Fairfax may acquire the rest of the shares in BlackBerry that it doesn't already own. 

On the downside, a loss of the 200-day moving average is a bearish development, and could put the $4.60 area in play. A close below the July low at $4.45 should concern the bulls.