A Troubling Formation In BlackBerry's Chart

Since mid-October, a potentially troubling technical pattern has been developing on the chart of BlackBerry Ltd BBRY. A look at a six-month chart of the stock reveals the recognizable bearish “head and shoulders” technical formation that has materialized in the past few weeks.

A Bounce-Back 2014

The story of BlackBerry (formerly Research in Motion) is no secret.

BlackBerry devices were the largest and most recognizable casualty of the smartphone wars that have played out over the past decade.

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BlackBerry shareholders have watched as competition such as Apple Inc AAPL and Samsung have gobbled up BlackBerry’s market share year by year.

BlackBerry stock is down about 85 percent over the past five years and well over 90 percent from all-time highs.

However, 2014 has provided some much-needed relief for beleaguered shareholders. BlackBerry stock has bounced back 30 percent year-to-date on hopes that the company can adapt and reinvent itself, or that the value of the company’s assets will attract buyers.

The Head And Shoulders

In mid-November, Blackberry stock broke out to new 52-week highs, climbing as high as $12.50. Unfortunately for shareholders, the breakout didn’t last, and the pattern that has developed since is not a comforting one.

After the “head” of the pattern was formed during the breakout to $12.50, the right shoulder was put in place when the stock couldn’t break through resistance at around $11.00 in the early days of December.

With the $10.00 support level failing to hold on Friday of last week, the formation of the bearish pattern seems to be complete.

What's Next?

The next potential support line for the stock appears to be around $8.75, a level that has provided support for the stock twice since the end of July and represents the base of the left shoulder in the pattern.

While the short-term technical picture for Blackberry doesn’t look great, shareholders who believe in the long-term fundamentals of the company can take comfort in the fact that technical weakness can often be a short-term phenomenon.