Indicators Continue to Support Higher Blackberry Stock Prices

bbry stockBBRY Stock Price News

BlackBerry Ltd (NASDAQ:BBRY) stock is up over 16% on the news that the company won an arbitration settlement against QUALCOMM, Inc. (NASDAQ:QCOM) worth $819.7 million. This is a significant sum for BlackBerry; it represents more than half of the revenue that BlackBerry was able to generate in 2016. This news may have come as a surprise, but the subsequent news about higher BBRY stock prices were not.

My earlier article, “Reversal Pattern Implies Higher Blackberry Stock Prices,” published on April 6, 2017, outlined that there were technical developments on the company’s price chart that served to suggest that higher BlackBerry share prices were on the horizon.

The basis for my bullish view in that article, and the one that came only days before it, “An Explosive Move in BlackBerry Stock Is Brewing,” were all generated using technical analysis. This method of investment analysis is based on the notion that historical price and volume data can be used to discern a price trend and forecast future prices.

As silly as this may sound, I have found great success using this method, and I have been refining my skills in this method of analysis for nearly two decades.

The following BlackBerry price chart illustrates the technical price pattern that is suggesting that higher stock prices are likely.

bbry stock chart

Chart courtesy of StockCharts.com

The technical pattern that is illustrated on the price chart above is a symmetrical triangle. These patterns are particularly powerful indicators.

This very special technical price pattern is defined using two converging trend lines. The upper trend line represents price resistance while the lower trend line represents price support. As this pattern develops, the range between support and resistance begins to contract. This contraction of space causes momentum to build within the pattern. This momentum is finally released when the price exits the pattern, and a powerful reaction is expected to follow.

On March 31, BlackBerry broke out of this symmetrical triangle, and this feat is highlighted on the price chart above as a “breakout.” Because this symmetrical triangle was resolved in an upward bias after a prolonged bear market, this pattern is can also be referred to as an “ending triangle.” A completed ending triangle indicates that the bearish trend toward lower prices has finally concluded, and that a higher stock price can now be expected to follow.

The following BlackBerry stock chart illustrates the price action that followed the completion of the technical price pattern that suggested a bottom has been put in.

bbry stock chart

Chart courtesy of StockCharts.com

The breakout of the symmetrical triangle was done in dramatic fashion. A breakaway gap was created when BBRY stock closed at $6.95 on March 30, 2017 and opened the next day trading at $7.53. Gaps that are created when exiting a technical pattern are known as breakaway gaps.

Breakaway gaps rarely get filled, and almost always indicate that a new trend is in development. In the days following the breakout that was created by the better-than-expected earnings report, the breakaway gap has been tested on numerous occasions. The opening gap-up price at $7.53 is the level of support that is highlighted on the chart above.

From April 4 onward, BBRY shares drifted lower in an orderly manner. This orderly decline is easily defined by using a trend line. Using this trend line as a tool is as easy as it was to create. As long as BlackBerry shares remain below this trend line, the bearish trend toward lower prices remains intact.

When, and if, BBRY stock breaks above this trend line, it will serve to suggest that another advance is set to take place. This is exactly what occurred in the last hour of trading on April 11, after support was successfully tested earlier in the day.

As a result, the 16% pop in shares on the morning of November 12, 2016 was not a total surprise because the price chart was setting up for an advance.

The following BlackBerry stock chart illustrates where overhead resistance currently resides.

bbry stock chart

Chart courtesy of StockCharts.com

I outlined in my previous article that the bullish developments that have occurred are still within the context of an overall bearish trend. This bearish trend is best illustrated on the price chart using a downtrend line. This downtrend line defines a trend that began in 2008 after BBRY stock peaked and began its tumble toward much lower stock prices. In order for a true bull market to exist, BBRY shares need to break above this trend line.

The completed technical triangle price pattern is suggesting that this trend line is now going to be tested in the not-too-distant future. This level currently sits at $12.00, and I fully expect BBRY shares to hit this marker.

Bottom Line on BlackBerry

I am bullish on the prospects of BlackBerry stock, and I have reason to believe that the downtrend line that began in 2008 is the next logical objective for BBRY stock. This bullish view was generated after a completed technical price pattern suggested that a bottom had been formed. I will continue to hold a bullish view on BlackBerry shares until there are indications on the price chart that another view is warranted.