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Is the Short Squeeze in BlackBerry Back On?

The short squeeze trade is back in play with BlackBerry and others ripping to the upside. Here's the must-watch resistance level for the stock.

BlackBerry  (BB) - Get BlackBerry Limited Report shares started Tuesday morning with a burst, opening higher by more than 11%.

Although bulls did see a hearty fade from the highs, shares have recovered from the intraday dip and were rising by about 13%.

The action comes alongside a powerful jolt in  (AMC) - Get AMC Entertainment Holdings Inc. Class A Report Entertainment and GameStop  (GME) - Get GameStop Corporation Report, which are both up by about 20% and 10%, respectively.

The action in some of these names comes on renewed interest in the so-called “meme stocks,” which have been exploding higher as short squeezes continue to fuel the recent rally.

However, it’s also led to increased volatility. For example, at one point on Friday BlackBerry climbed more than 21%, yet it closed higher by just 1% on the day.

Further, the stock gained over 18% last week, although it was up more than 40% for the week at one point. With Tuesday’s rally, let’s take a closer look at the chart.

Trading BlackBerry

Daily chart of BlackBerry stock.

Daily chart of BlackBerry stock.

Like Canopy Growth  (CGC) - Get Canopy Growth Corporation Report - a stock I also examined earlier on Tuesday - BlackBerry shares exploded higher earlier in the year, then settled into a painful downtrend that lasted for several months.

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In mid-May, the stock held the 200-day moving average as support, then quietly broke out over downtrend resistance (blue line). After this breakout, shares hugged the 10-day and 21-day moving averages while trading in a tight range.

Then last week we got some fireworks.

Shares burst through the key $9.30 area, which was a prior support level turned resistance. On Friday, the stock ripped through the 21-week moving average and ran to the key $12.13 zone.

However, this area rejected the stock and then it failed to close above the 21-week moving average.

With Tuesday’s action though, BlackBerry looks much better.

From here, see that the stock continues to hold the 21-week moving average as support. On a break of this measure, it could put $10 and the $9.30 mark back in play.

On the upside, let’s see if the stock can breakout over $12.13. In that scenario, perhaps the $14 to $15 zone would be in play. Above that and who knows, perhaps we could see a further squeeze into the $17 to $20 area.

While that seems like an unreasonable rally, just look at what AMC has been doing. Not many were looking for such a rally, yet here we are.

With BlackBerry, keep an eye on the 21-week moving average on the downside and $12.13 on the upside.