Does the idea of beleaguered mobile phone maker Blackberry going private – even by leveraged buyout – have too much working against it to even warrant consideration?
Without a doubt, there’s a stormy black death halo of negative sentiment encircling Blackberry (symbol: BBRY) with more than one analyst heralding its demise and calling quite brazenly for investors to retreat. There’s even some debate over whether a tenable deal could be reached where private equity would strip the firm for scrap. The market crowd has a dangerously unpredictable faculty for forgiving and forgetting; doling out absolution here, showing zero cognizance of chronic missteps there. But no matter its valiant attempts at revivifying its brand and product line, The Company Formerly-Known-as-Research-in-Motion seems to have committed the one unpardonable sin: it has failed to make markets forget.
Some investors are terminally alienated by this kind of a toxic narrative about a stock. If BBRY‘s chart is any guide, though, there are plenty of cautiously optimistic doubters out there.
Recall that BBRY has been here before. Whatever it’s former identity, it is a stock of intense speculation and certainly not immune to the petty bread-and-butter gaming some institutional denizens of our stock markets like (and are compensated) to play.
Blackberry (BBRY) –Â Weekly Chart
In that context, BBRY nearly tripled betweeen September 2012 and January 2013, soaring from $6.22 to as high as $18.32. Following that run, a lengthy 5-month consolidation took place (as markets awaited the results of the company’s much anticipated Z10?), from which a resolute breakdown occurred the week of 06/24/13, losing over 34% in 5 weeks.
That brings us to the present. The -34% decline mentioned brought BBRY to the 78.6% fibonacci retracement level of Sep 2012-Jan 2013’s range at $8.88. The week of 07/29/13, the stock initially traded lower, pushing down to $8.57 before bulls retook some modicum of control, bidding back to an 08/02/13 close of $8.92. The result is what candlestick aficionados refer to as a “hammer”.
The interest in this level isn’t by accident. Along with the 78.6% retracement – a likely place to stage a rally attempt, if there were to be one – the Jan-Jun 2013 symmetrical triangle’s breakdown target falls at this level. If that weren’t enough, the 161.8% fibonacci extension of triangle’s final swing low to swing high (Apr-May 2013) plots here as well. (click image to zoom):
This confluence of noteworthy technical features creates a formidable “cluster” of support. There is no guarantee these clusters will be acknowledged or respected; or that once acknowledged by a pause or bounce they won’t be subsequently disregarded. But clusters such as the one present at BBRY 8.75-9.00 are major points of interest because they represent a composite of major but disparate technical levels commonly used and observed by market technicians and chartists. When these levels overlap as they do on BBRY, they take in a broad swath of what different market observers view as support. Those scaling in to an issue on value or looking for a short-term tradeable bottom do well to sit up and take notice of what happens next.
In the case of BBRY, last week’s 8.5% rally happened. The bullish potential bottled up in the hammer candle the week of 07/29 was decisively unleashed. Or looked at another way, Reuters’ release of an anonymously-sourced exclusive reporting that Blackberry going private is on the table among the company’s leadership occurred just as BBRY found tentative technical footing in the wake of its early summer sell-off.
This isn’t to say “sources” at Blackberry are timing press leaks with candlestick patterns (sounds like a hopelessly obscure Dilbert storyboard reject). Consider, though, that candlesticks and clusters aren’t ends-in-and-of-themselves; but evocative of the market’s net attribution of value and and ultimately sentiment toward a company (or currency, commodity, etc.). No matter the ardent pessimism around Blackberry going private or its ultimate fate, its stock’s shorter-term technicals are dropping clues suggesting some are willing to put money down that its future prospects – even if it’s dissolution – are a bargain here.
Twitter: @andrewunknown and @seeitmarket
No position in any of the mentioned securities at the time of publication.
Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
