BlackBerry (BBRY) reported a less-than-expected third-quarter loss before the open on Friday, and the stock closed up over 10% in the regular session on heavy volume. The move took out key resistance on the daily chart and is testing an equally important resistance level on the weekly timeframe.
It is always important to take a look at where a stock has been before any conjecture on where it might be headed in the future. The decline in BlackBerry since its 2008 high has been of epic proportions, with shares dropping over 95% to their recent lows.
Since the middle of 2012, however, while the shares have continued to make lower highs, they have held above the $6 level. Three distinct tests of that support have the potential to mark a triple bottom in the stock price. The $9 area was important support in 2014 and earlier this year, and now it is acting as resistance.
A look at the most recent price action on the daily timeframe shows that the test of the $6 level in October was the nadir of a saucer or rounded bottom pattern. The pattern developed over the last six months under horizontal resistance in the $8 area. That resistance was tested repeatedly in November and again this month, then broken decisively on Friday, taking the stock through its 200-day moving average and back up to long term resistance in the $9 area. The strong close is reflected in the price momentum indicators, but they had been advancing higher before the late-week surge.
The relative strength index moved above its centerline two weeks ago, and daily moving average convergence/divergence, which is overlaid on a weekly histogram of the indicator, crossed above its centerlines on both timeframes just after the saucer low.
The heavy volume is reflected in the volume bar, and direction of the money flow associated with it is reflected in the positive reading on the money flow index.
Have BlackBerry shares made a triple bottom and a potential generational low? Of course it is impossible to know, but the price action and technical evidence suggests a speculative trading opportunity. The stock is a buy at its current level or on a retrace to the $8 resistance-turned-support line, using a tight trailing percentage stop.