BlackBerry Limited (BB) stock may have entered the first uptrend in more than 12 years, setting the stage for strong 2021 returns. Even so, the fallen giant and perennial under-performer needs to jump through more hoops to convince skeptical investors to come off the sidelines, given repeated false starts in the past decade. That shouldn't matter at the moment, with the stock holding up well after more than doubling in price since the end of October.
- BlackBerry may have entered an uptrend after announcing an agreement with Amazon.com, Inc. (AMZN).
- Autonomous vehicle software could offer a steady source of income.
- The stock needs to trade above barriers at $8.20 and $14.55 to confirm the uptrend.
- Chronically weak sentiment may keep many investors on the sidelines.
A steady uptick off the Oct. 30 low exploded to the upside at the start of December after the Canadian tech firm announced a multi-year global agreement with Amazon's cloud division to develop and market the Intelligent Vehicle Data Platform. BlackBerry started work on autonomous vehicle technology several years ago, in an effort to replace lost smartphone revenue, but this marks the first sign that the effort could yield substantial income.
Investors will get a chance to review the long-term outlook when the company reports fiscal third quarter 2021 results after Thursday's closing bell, when analysts expect a loss of $0.01 per share on a meager $224.7 million in revenue. The stock sold off after a rally gap in September despite beating modest top- and bottom-line estimates, highlighting chronically weak sentiment that will take more than one quarter to overcome.
Wall Street coverage on BlackBerry has dried up in recent years, with just three analysts covering stock. That could change after this week's confessional, but broad coverage might have to wait for quarterly revenue to meet higher thresholds. BlackBerry is currently rated as a "Hold," while price targets range from a low of $6.00 to a high of $7.50. The stock is now trading about 80 cents above the high target, but additional details on the agreement could yield upgrades.
Sentiment refers to the overall attitude of investors toward a particular security or financial market. It is the feeling or tone of a market, or its crowd psychology, as revealed through the activity and price movement of the securities traded in that market. In broad terms, rising prices indicate bullish market sentiment, while falling prices indicate bearish market sentiment.
BlackBerry Long-Term Chart (1999 – 2020) (Log Scale)
The company came public on U.S. exchanges in 1999 and quickly posted an all-time low at a split-adjusted $1.14. It took off in a strong uptrend during the internet craze, topping out at $29.29 in 2000, ahead of an equally ferocious downtrend that found support just 35 cents above the prior low in 2002. A mid-decade uptrend posted historic gains, lifting to an all-time high at $148.13 before given way to a 76% decline during the economic collapse.
The stock completed a double top breakdown in 2011, entering a brutal downtrend that found support in the mid-single digits in 2012. It tested that trading floor successfully in 2013, 2015, 2016, and 2017, while modest rallies got sold aggressively whenever price lifted into the low teens. Long-term support failed in the first quarter of 2020, dropping BlackBerry about two points above the 1999 low before a two-legged advance remounted the level earlier this month.
The rally booked the highest volume in the stock's history, predicting that the uptrend has come to an end. However, technical confirmation needs price action to end the string of lower highs in place since 2009, requiring a buying surge above the 2018 high at $14.55. In addition, the advance has now stalled at 50-month exponential moving average (EMA) resistance, where the prior recovery wave failed. As a result, a solid thrust into the double digits is also needed to prove that the uptick isn't a flash-in-the-pan.
Confirmation refers to the use of an additional indicator or indicators to substantiate a trend suggested by one indicator. Since technical indicators are not perfect predictors of future price movements, a trader often feels more secure deciding to act on a signal if more than one indicator is sending the same signal.
The Bottom Line
BlackBerry stock is trading well above the 200-day EMA for the first time since 2018, but continued upside is needed to confirm the first uptrend in more than a decade.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.