BB Stock: Anticipating a Bounce off This Level
The markets are under complete duress, and the selling pressure is immense. Records are being made as the biggest one-day point drops are recorded, and the volatility index has recorded its largest one-day spike. It’s not difficult to conclude that a panic event is currently unfolding as emotions are beginning to run high.
Market moves based on emotion do not last very long, and such events have a tendency to create opportunities, as the “baby gets thrown out with bathwater.” With this in mind, I am focusing on BlackBerry Ltd (NYSE:BB) stock because it is one of my top picks for 2018, and this “baby” has endured stock price weakness as the markets have sold off.
I have good news to share, however. I believe that an opportunity may have just presented itself. The weakening that the BB stock price has just endured has done very little to change the overall bullish picture that is currently being suggested by the Blackberry stock chart.
The picture became bullish when the following technical price pattern was completed on January 2.
Chart courtesy of StockCharts.com
The technical price pattern highlighted on the stock chart is a cup and handle.
This pattern was created because a significant level of price resistance, which resided at $11.80, contained the BB stock price from advancing. The inability to break above $11.80 created two distinct troughs, with the first trough being much larger than the second.
On January 2, Blackberry stock finally broke out above this level of price resistance, completing the price pattern and implying that higher BB stock prices were on the horizon. I already had the inclination that this pattern would play out this way because the cup and handle was developing right above the 200-day moving average.
The 200-day moving average is a simple tool that acts like a dividing line that separates bullish stocks from bearish ones. Trading above this metric is a bullish indication that the stock is healthy and likely to appreciate.
After a brief move toward higher prices, BB stock has been caught in a downdraft, which is best labeled as a correction. The recent market turmoil has caused the stock price to return and test the signification level of price resistance that defined the cup and handle price pattern.
Returning to test a broken level of resistance is a very common occurance. This price action is referred to as a backtest, and it serves to reaffirm that the break above resistance was legitimate while simultaneously establishing the previous level of resistance as a new significant level of price support.
I am assuming and anticipating that the Blackberry share price will find its footing at this level, and that another attempt at much higher prices will be made.
This speculative move toward higher BB stock prices is set to occur within the context of a new bull market, suggested by the indications on the following stock chart.
Chart courtesy of StockCharts.com
This Blackberry stock chart illustrates what is left of a bearish trend that was in development since June 2008, right after the stock price peaked at $148.13.
This bearish trend contained the quintessential characteristic that defines all bearish trends, which is price action consisting of a series of lower lows and lower highs. Capturing this bearish trend was accomplished by using a simple downtrend line, which was created by connecting the lower highs that define this trend.
The completion of the cup and handle pattern coincided with a break above the downtrend line, and the repercussions of these coinciding events continue to suggest that the decade-long bear market has finally come to an end and that, in its place, a new bull market is now in development.
This developing bull market, in which much higher BB stock prices are likely to prevail, is why Blackberry is currently one of my top picks for 2018.
Due to market duress, Blackberry stock has returned to test a significant level of price support. I have the inclination to believe that that this level will hold, and that higher BB stock prices will prevail.When this level was broken the first time around, it ended a bear market that was 10 years in the making.