The Blackberry Stock Price Action Supports Higher Prices

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BBRY Stock: Constructive Price Action

I am really getting to enjoy tracking BlackBerry Ltd (NASDAQ: BBRY) stock because it is acting in accordance the rules set out by technical analysis, which makes it a great candidate to base a trading strategy around.

Technical analysis is the method I employ to analyze investments like BlackBerry stock because it is the only method of analysis that provides timely indications that can be applied to a trading strategy. When this is done appropriately and diligently, the results are simply outstanding.

I was tracking the stock for some time but it was not until April of this year that I became enamored with BBRY stock. That month, Blackberry completed a technical price pattern that suggested that higher stock prices were on the horizon, and of course, that suggestion did not disappoint because Blackberry stock appreciated by 57.16% in quick order.

The following stock chart illustrates the completed technical price pattern that suggested higher stock prices were on the horizon.

BBRY Stocks Chart

Chart courtesy of StockCharts.com

The technical price pattern that is annotated on the BBRY stock chart is a symmetrical triangle. This technical price pattern is characterized by a series of lower highs and higher lows. This pattern is best captured using two converging trend lines that define respective levels of price support and price resistance.

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Triangles are particularly powerful price patterns, and it is why I pay a lot of attention to them when I come across them. The power generated by these patterns is a result of momentum being stored within the pattern as it develops. The stored momentum is released when the stock price breaks either above resistance or below support.

The size and scope of the pattern is directly related to the reaction that follows once this pattern is resolved. This pattern was large in size and scope, as it took four years to complete. On March 31, BlackBerry reported stellar earnings, and it was off to the races. The completed symmetrical triangle resulted in a move towards higher prices, which translated in gains of 57.16% before everything was said and done.

Following this brief and abrupt surge towards higher stock prices, Blackberry stock proceeded to correct. The level at which the stock found support was marked by a very important and influential metric.

The following BlackBerry stock chart illustrates the important and influential metric that defined support.

blackberry price chart

Chart courtesy of StockCharts.com

This BBRY stock chart highlights the 200-day moving average. This metric is used as a dividing line that separates bullish investments from bearish ones, and using it is quite simple.

If an investment is trading above the 200-day moving average, it is a bullish indication, and bullish implications are excepted to follow. If an investment is trading below the 200-day moving average, it is bearish, and bearish implications are expected to follow.

In March, when BlackBerry stock gapped above the 200-day moving average, it marked the beginning of bullish things to come. It just so happens that the break above the 200-day moving average coincided with the completion of the symmetrical triangle reinforcing the bullish premise implied by both these metrics.

It is not uncommon for this moving average to act as a level of price support, so when BBRY stock bounced off this level in August, it came as no surprise. Since that day, the price action has become constructive, which suggests that the correction has concluded and a new trend towards higher stock prices has begun.

This constructive price action is illustrated on the following stock chart.

BBRY Stock Chart

Chart courtesy of StockCharts.com

This BBRY stock chart is an excellent example of constructive price action. Constructive price action consists of an alternating wave structure containing impulse waves and consolidation waves.

An impulse wave is the period in a bullish trend where the stock stages an advance towards higher prices.

A consolidation wave is the period in a bullish trend where the gains from the previous impulse wave are digested in order to alleviate any overbought conditions that were created. Alleviating an overbought condition creates the necessary environment where a new impulse wave can develop.

These waves feed off each other, and in alternating wave structure, they create the necessary building blocks for a trend to sustain itself and flourish.

The surge in price on September 20 confirmed that this is indeed constructive price action, which confirms that the trend now is geared towards higher Blackberry stock prices.

Analyst Take: 

After testing support at the 200-day moving averages, Blackberry stock has staged an advance that is constructive in nature. This wave structure confirms that the trend is now geared towards higher stock prices, which reaffirms my bullish stance on BBRY stock.