Dear BlackBerry Shorts: You Have Been Warned (Twice)

NEW YORK (TheStreet) -- For BlackBerry (BBRY) longs, 2014 has been great, with the stock up over 35% year-to-date. On the flip side, it has been a torturous ride for the short-sellers, and there are still plenty left. 

Of the 471.6 million share float, roughly 94.5 million shares are sold short, or 20%. With a short interest that high, it tells me there's still room to squeeze on the upside.

Couple the moderately high short interest with positive news from the company, and it's a painful disaster just waiting to happen for the bears. 

For the record, I was a BlackBerry bear in 2013. In January, I turned neutral on the stock.

Between my not-bearish-anymore piece in January, and my Don't Short BlackBerry article on Feb. 21, the stock rallied 20.11%. The stock has stormed even higher since that article in late February, up over 10%, before fading lower on Thursday.  

In my last BlackBerry article from February, What's Next for BlackBerry?, I wrote:

Market sentiment is much better than it was during its disastrous 2013 run, which was littered with product failures, incompetent management and rampant spending that could make a Kardashian look cheap. Hell, the company couldn't give itself away last fall.

With earnings set to be reported March 28, I would cautiously recommend not shorting the stock. If you have to be short, consider doing it via put options, so that your risk is defined and you know your maximum loss.

Any takeover chatter, 'profitable-sooner-than-we-originally-thought' talks from management, or a ballooning valuation for BlackBerry Messenger could send this stock into the double digits in a hurry.

Sure enough, the stock quickly rocketed higher, through $10, and found stiff resistance near $10.75. Technicians could argue that the stock is putting in a bearish double top, which is illustrated below, compliments of

Let's start with CEO John Chen. He is leaps and bounds better than Thorsten Heins, the previous leader of the handset maker. 

Chen is honest, while Heins scared investors with comments about how the tablet market would barely exist in a few years and why his phones would dominate the market.  Neither claim was further from the truth.

Chen, on the other hand, seems to be realistic. Originally, I considered his plan for reaching profitability by fiscal 2016 as too difficult. I still do. But he's on record saying that there is only a "50-50 chance" that the turnaround plan will actually work. 

When Facebook (FB) bought WhatsApp for $19 billion, everyone was quick to suggest that BlackBerry's Messenger feature would suddenly be worth more than the whole company.

Thankfully, Chen -- who admitted to being open to spinning off the asset -- said that BlackBerry won't be "getting our $19 billion" yet, at least until the company refines the product a bit.

BlackBerry has a bit of the "it" factor. Of course it's easy to shoot against the company's current state. It's losing money each quarter, and as Chen said, it has only a coin-flip chance of succeeding. I, for one, am in the camp that the turnaround will fail. 

But you have to recognize something like I did in January. Even if you think BlackBerry can't turn it around, it doesn't matter. It's about the psychology of the herd, also known as the market. 

I'd be careful with the stock on the short side. Quite frankly, I wouldn't be on it. There's probably some support around $9.50, and the trend is certainly favoring the upside. 

Maybe, just maybe the short thesis can regain some of its credibility.  

But Chen has reset everything. He's lowered expectations and let the weak shareholders wash out. More positive news -- such as the teaming up with Ford (F) -- and momentum could pick back up. 

I'd suggest you either be long on this stock or flat it. Regardless of whether the fundamentals change, I would not short it until the crowd changes. There's plenty of room to the downside, if the time comes. 

At the time of publication, the author held a long position in Ford.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

-- Written by Bret Kenwell in Petoskey, Mich.

Bret Kenwell writes, blogs and also contributes to Robert Weinstein's Weekly Options Newsletter. Focuses on short-to-intermediate-term trading opportunities that can be exposed via options. He prefers to use debit trades on momentum setups and credit trades on support/resistance setups. He also focuses on building long-term wealth by searching for consistent, quality dividend paying companies and long-term growth companies. He considers himself the surfer, not the wave, in relation to the market and himself. He has no allegiance to either the bull side or the bear side.

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