BlackBerry Ltd: BBRY Stock is Setting Up for a Big Run

BlackBerry LtdBBRY stock: A Powerful Move is Brewing

BlackBerry Ltd (NASDAQ:BBRY) stock has caught my eye, and for good reason. A large trading pattern has developed on the chart, and resolution to this pattern is imminent. This pattern I am referring to has been four years in the making. Patterns of such duration are no laughing matter. They are now used to catch investors sleeping at the wheel as shares surge as a resolution to price direction is finally realized.

BBRY stock has spent the last four years creating a descending triangle. In general, these triangles are seen in a bearish light, based on the trading action. Each and every time BBRY stock approaches support at $6.20, buyers appear to support the price. Each subsequent rally ends at a lower high as sellers are more willing to exit positions at a lower price.

On average, these patterns break down, but that is not always the case. Descending triangle patterns often have five points of contact before the pattern breaks in either an upward or downward direction. On average, a breakout usually occurs when the pattern has completed 70% of the triangle. BBRY stock has fulfilled these objectives. A breakout is imminent.

The following chart illustrates the pattern that has developed in BBRY stock.

BlackBerry NASDAQ Chart

Chart courtesy of StockCharts.com

The power generated from these patterns is a result of the price coiling into a small space. The price bounces from each respective resistance level and builds momentum each time the price is rejected by the trend line. Each camp is respectively building a position and holding the line. A breakout would cause one camp to cover, or exit their respective position, and then a substantive run in share price would follow. The pattern suggests a price move of $12.00 following a break. If price breaks lower, a price objective of $0.00 is expected; if price breaks higher, a price objective of $20.00 is expected.

It is not uncommon for triangles to appear at the end of a trend. These patterns are known as “ending triangles”. Ending triangles break both upwards and downwards. A downward break would signal a false break lower, and share price would quickly turn and break higher. Ending triangle patterns are significant trend-reversal indicators.

I am starting to lean towards the bullish camp, but there is still a resistance level that needs to be addressed.

The following chart illustrates the last level of resistance if the price breaks higher.

BlackBerry Ltd NASDAQ INDX

Chart courtesy of StockCharts.com

The chart above illustrates the downtrend that has prevailed since shares peaked in 2008. The downtrend line, highlighted in blue, is created by connecting the peaks. A downtrend is defined by lower lows and confirmed by lower highs. It can easily be identified as the price moves from the upper left to the lower right. This is a clear example of bearish price action. For a true bull market to exist, BBRY stock needs to break above this level of resistance. Current downtrend resistance stands at $15.00.

An upward breakout of the descending triangle has an initial target of $20.00. This means that the downtrend will be tested. If shares can indeed hit $20.00, this would mean that the bear market has ended its terror, and that a new bull market has been born. Finally, a piece of good news for BlackBerry stock shareholders to look forward to.

The Bottom Line on BBRY Stock

The descending triangle that has developed over the years is now ready to resolve itself. I have started leaning toward the bullish camp. The price move following the break is expected to be substantial, so being on the right side of the trade is in everyone’s best interests. It is wise to wait for a resolution before initiating a position in BBRY stock.