This 1-Week Prediction of BlackBerry (TSX:BB) Might Surprise You

BlackBerry (TSX:BB)(NYSE:BB) is in the middle of a short squeeze. This week is crucial. If you own the stock, it is time to book some profit. 

| More on:
Man holding magnifying glass over a document

Image source: Getty Images.

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Last week, you saw the beginning of the second wave of a short squeeze in three meme stocks: BlackBerry (TSX:BB)(NYSE:BB)Gamestop, and AMC. Hence, I bring a one-week prediction of the BlackBerry short squeeze, because that is how long this trading game will last. For the fundamental investor, BlackBerry is a long-term hold but not a buy this week.

Don’t chase a rally you can’t predict 

Indeed, price doesn’t matter to long-term investors, but it is also true that you should buy the dip. BlackBerry is the second-largest holding in Prem Watsa’s portfolio, but he bought the stock when it was trading below $8. And famous value investor Warren Buffett bought Apple stock when it dipped in 2018.

What can you learn from these billionaires? Don’t chase the rally you can’t predict. When the stock surges past its average trading price, you cannot tell when it will reach its peak. But when a fundamentally strong stock dips from its average trading price, you know it will rally, and this rally will have a catapult effect.

BlackBerry doesn’t have attractive fundamentals, but it has growth potential in the coming 10 years. The stock’s 50-day moving average is $11, and the 200-day moving average is $10. Buy the stock if it falls below $11 or $10. But do not engage in any buying activity above $11.

Learn from the January BlackBerry short squeeze 

As of the date of writing, BlackBerry stock is trading above $12, as the subreddit WallStreetBets begins the game of the short squeeze. The rules of the game are simple. Retail investors flock to buy the stock, thereby inflating the stock price. They challenge the hedge funds with a short position in the stock to square up their position by buying the stock from them at a premium from the market price.

These Redditors played their first game in January. They started buying on January 14 when the stock traded above $11 and inflated the share price to $17 by January 22. All this happened in seven working days. This inflated price was so attractive that BlackBerry’s CFO and chief marketing officer sold 100% and 60% of their directly owned shares, respectively. As they have equity-based incentives, they believed $17 is a good price to book profits.

They exited while the rally was ongoing — a wise decision. On January 25, the hedge fund managers played their bets and bought the shares in large volumes for $23-$25. Not everyone got this premium. And then the stock fell to $14.

The one-week prediction of BlackBerry 

In the second short squeeze, I expect BlackBerry stock to rally this week to as much as $15. Unlike last time, the short interest is less than 10% of BlackBerry shares trading on the exchange, leaving less room to boost the price.

You should take profits on most of the BlackBerry shares you own in the $13-$15 range, because when the hedge fund plays its bet, you may not be able to beat Redditors in the selling game. I believe hedge funds would allow the stock to surge to $15. The stock made a high of $14.59 on May 28, and yet it didn’t trigger a hedge fund buying.

Once the stock crosses the $15 threshold, it is difficult to predict. Take profits while you can and buy the stock later when it dips to $10. A $10-$11 buy price will create a catapult effect and enhance your medium- and long-term returns.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Puja Tayal has no position in any of the stocks mentioned. David Gardner owns shares of Apple and GameStop. The Motley Fool owns shares of and recommends Apple. The Motley Fool recommends BlackBerry and BlackBerry and recommends the following options: short March 2023 $130 calls on Apple and long March 2023 $120 calls on Apple.

More on Tech Stocks

clock time
Tech Stocks

Now’s the Time to Load Up the TFSA With These 2 Top TSX Stocks

Here are two top TSX stocks that long-term growth investors may not want to give up on, especially at these…

Read more »

shopping online, e-commerce
Tech Stocks

Shopify (TSX:SHOP) Stock Recovers 30% From its 3-Year Lows: Should You Buy?

Shopify stock: Should you buy the dip or wait for more weakness?

Read more »

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Tech Stocks

What Market Correction? 2 High-Growth Tech Stocks That Are on the Rise

I don’t think it will be long before these two Canadian tech stocks are back to delivering market-crushing returns.

Read more »

grow dividends
Tech Stocks

Why Kinaxis (TSX:KXS) Stock Jumped 14% Last Week

Kinaxis Inc. (TSX:KXS) stock popped over the past week after adding yet another big company to its impressive stable.

Read more »

potted green plant grows up in arrow shape
Tech Stocks

TFSA Investors: Double Your Investments With These 3 Top Growth Stocks

Despite the volatility, I am bullish on these three stocks, given their solid growth potential.

Read more »

Arrow descending on a graph
Tech Stocks

2 Industries That Saw the Worst Decline Last Month

The TSX has been declining at a sharp angle since the beginning of June. And two industries (crypto and cannabis)…

Read more »

Dividend Stocks

TFSA Investors: Turn $1,000 Into $10,000 in 10 Years

10-fold growth within a decade is rare but not unheard of. You can capture this growth either by predicting a…

Read more »

Growth from coins
Tech Stocks

Got $1,000? Buy These 3 Under-$20 Growth Stocks to Earn Higher Returns

These under-$20 growth stocks can deliver solid returns in the long run.

Read more »