BlackBerry Limited (BB) surprised Wall Street with a strong third quarter earnings report on Wednesday morning, indicating that reorganizational efforts are finally paying off and allowing the former tech giant's shares to emerge from a multi-year bear market. Three strong quarters and a healthy fiscal-year outlook could lift the stock into the upper teens in the first half of 2018, while rapid growth in its autonomous driving division could power more dramatic gains in coming years.

The stock bottomed out in 2013 following a near death spiral from $148 to $5.44 and has made limited progress since that time, stuck in a seven-point trading range while the majority of the tech universe blasted to bull market and all-time highs. Fortunately for long-suffering shareholders, this week's report could ignite a January Effect rally that lifts the stock through range resistance and into the first major uptrend in nearly a decade. (See also: BlackBerry Stock Breaks Out on Positive Earnings.)

BB Long-Term Chart (1999 – 2017)

 

The Canadian company came public on the U.S. exchanges at the height of the internet bubble in 1999, opening at a split-adjusted $1.85 and entering a strong uptrend that continued into February 2000, when it topped out at $29.29. That marked the highest high for nearly five years, giving way to a deep slide that bottomed out just 25 cents above the low posted right after the initial public offering.

BlackBerry shares returned to the prior high in the fourth quarter of 2014 and ground sideways for two years, carving the handle of a massive cup and handle breakout pattern. The stock took off in a powerful trend advance in September 2006, jumping nearly 120 points into the June 2008 all-time high at $148.13, but it relinquished nearly all of those gains in just six months during the economic collapse.

A lower 2009 high and decline into 2011 completed a broad double top breakdown, generating a decline that reached single digits in 2012. It posted a lower 2013 low just above $5.00 and bounced to $12.62 in January 2015, with those price levels containing price action into December 2017. The stock has rallied within 50 cents of range resistance in reaction to this week's earnings report and could break out, heading toward the 2013 high at $18.32. (For more, see: Is BlackBerry a Buy After Its Pivot?)

BB Short-Term Chart (2013 – 2017)

 

A Fibonacci grid stretched across the 2013 sell-off organizes key price levels within the long-term basing pattern. The bounce into the first quarter of 2015 ended at the .50 retracement level, yielding a slow-motion pullback that posted a higher low in October 2015. The stock spent the next 18 months stuck within a miniscule 3.5-point trading range before taking off in a 2017 uptick that ran into resistance in June just below the 2015 high. It has now broken out above that barrier, entering a major test at 2015 resistance.

The .618 resistance level near $13.50 should slow progress following a breakout, predicting progressive upside rather than a lightning bolt into the upper teens. In turn, this favors longer-term positions rather than swing trades looking for momentum buyers to generate quick upside. In addition, it is too early to buy the stock in anticipation of a breakout above the 2013 high because that bullish event, if it comes, could take months or longer to unfold.

On-balance volume (OBV) plunged into a 2013 low, bounced into 2014 and drifted sideways into the second half of 2015. A proportional distribution wave held well above the 2013 low, giving way to a sideways action that matched narrow range price action into 2017. Buying pressure has now increased, but the indicator remains well below the 2014 peak, signaling chronic apathy that may dissipate once the stock trades above $12.50. (To learn more, check out: Uncover Market Sentiment With On-Balance Volume.)

The Bottom Line

BlackBerry stock has stair-stepped to the highest high in nearly three years and could break out, heading for the upper teens. This price action may signal a long-term bottom ahead of healthy upside into the new decade. (For additional reading, see: BlackBerry Is Testing Driverless Cars.)

<Disclosure: The author held no positions in the aforementioned securities at the time of publication.>

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