BlackBerry Ltd. (formerly known as Research in Motion Ltd.) (BBRY) is trading at a 2-year high this week, after lifting into double digits for the first time since May 2015. A refocus on software, and licensing fees has underpinned the long overdue turnaround, following a brutal downtrend triggered by market share destruction in the wake of iPhone and Android. While revenues are unlikely to reach lofty levels posted during its smartphone reign, the newer smaller operation could pay dividends for patient shareholders.
The company beat fiscal fourth-quarter profit and revenue estimates in its March release while surprising Wall Street analysts with guidance that expects profitability and positive cash flow into 2018. Enterprise mobility management and security software divisions comprised nearly 84% of total revenues, with those units expected to drive growth in coming quarters.
BBRY Monthly Chart (1999-2017)
The Canadian technology company listed on the U.S. exchanges in February 1999, at the height of the Dot.com bubble. It opened at $3.69 and fell sharply, dropping to an all-time low at $1.14 just one month later. A bounce into midyear caught fire, lifting the stock in a vertical rally that topped out at $29.29 in March 2000. It fell more than 80% in the next three months, victimized by the collapse in tech stocks, and bounced back into the lower teens in October.
The wild two-sided action continued into the second half of 2001 when a more persistent downtrend took control. The decline broke yearlong support near $2.59 in May 2002 and entered a climactic phase that ended 25-cents above the 1999 low in October. The subsequent bounce continued the pattern of broad price swings, returning to the 2000 high in 2004 and breaking out in 2006, setting off a final buying spree that posted an all-time high at $148.13 in June 2008.
A bear market decline into the mid-30s generated horizontal support within a multi-year double top that broke to the downside in 2011. The stock plunged into the second half of 2012, finding support near $6.20 in 2012 but selling pressure didn’t end until it posted a deeper low at $5.44 more than one year later. Price action since that time has carved a shallow basing pattern that’s triggered an aggressive reversal each time it’s lifted into double digits.
As a result, the current rally wave has now entered a critical testing phase, highlighted by a series of 2014 and 2015 highs between $11.50 and $12.50. That price zone hides a massive June 2013 gap between $14.48 and $10.98 that remains partially unfilled nearly 4-years later. Also, the 50-month EMA has dropped into that resistance level, setting up a major battle because the stock hasn’t traded above that line-in-the-sand since 2011.
BBRY Weekly Chart (2012–2017)
A Fibonacci grid stretched over the 2013 decline brings order to the chaotic basing pattern, with the 2014 into 2015 recovery wave stalling at the 50% retracement level. The stock is now headed into that zone after lifting above the 200-week EMA for the first time since 2011. This combination suggests the upside will flame out in coming weeks, giving way to a bullish consolidation pattern or a major reversal back into single digits.
A trading range between $10 and $13 will set the stage for a secondary assault that could eventually reach the 2013 high above $18. Progress above that level will be difficult due to the massive double top breakdown and intense selling pressure in 2011. Even so, the majority of shareholders impacted by that catastrophic price action have now departed, allowing a new crowd of speculators to take advantage of the turnaround.
The Bottom Line
BlackBerry has rallied to a 2-year high in double digits and is expecting profitable results in the coming year. This positive price action should mark a long-term reversal that generates the first sustained uptrend in many years for the former smartphone giant.
<Disclosure: the author held no positions in aforementioned stocks at the time of publication.>