Trade Idea: short position on Blackberry

On the wave of the release of the new OS 10, the stock began an uptrend and kept its momentum until concerns about the stability of the customer base came out last week.

The stock made a lower high around the $17 level and it’s now rebounding toward what could be a new resistance, at $16 level. Although the uptrend is still intact (the stock held its $13 level), we see the congestion area as a predictor of a turnaround. The stock can hardly climb back to $16 from its current level, as it has always gapped in the last month to transition from $15 to $16.

The rebound of yesterday came after the big drop of Thursday that was due to the disclosure that the co-founder Jim Balsillie has sold its entire stake in the stock.

As recently as Q4 of 2011, BlackBerry owned nearly 9% of the global smartphone market, as measured by operating systems. By the fourth quarter of 2012, BlackBerry’s piece of the pie shrunk to just 3.5%, and Heins and team are relying on its new BB10 to turn things around.

The decision of Home Depot to stop providing their employees with Blackberry devices raised the fear that this might just be the tip of the iceberg and that others might follow through.

A good entry point is $15.5 level, once the stock has reversed its last bounce back (which is what ironically happened to occur while we are writing this trade idea). Should the stock move above $17.2 level, the trend would be invalidated.


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