BlackBerry (TSX:BB)(NYSE:BB) is a Reddit stock that’s been a crowd favourite over at WallStreetBets. The stock spiked and imploded earlier in 2021, enriching the early birds and punishing the chasers who ended up holding the bag.
Over the past few weeks, BlackBerry stock has been heating up again, thanks in part to action in AMC Entertainment, which was the tide that lifted all Reddit stocks.
BlackBerry’s managers are probably scratching their heads over the latest pop, given a lack of highly material company-specific news. And while the bounce may be more sustainable this time around, I think investors would be wise to approach BlackBerry stock with a game plan this time around to lower the risks of being left in tears at the expense of the retail army over at Reddit’s WallStreetBets.
What’s the game plan for investing in BlackBerry stock at this juncture?
BlackBerry is in an odd place right now. Shares are smack in the middle of the 52-week trading range at $17 and change. On the high end is the $32 mark, while the lower end is $8 and change. If the trade sours here, investors could see their investment realistically get cut in half. On the flip side, there’s really no telling just how high the so-called degenerates over at WallStreetBets can send BlackBerry stock flying this time around. They’re not only stronger, with over 10 million degenerates, but they’re also smarter and more coordinated in this second inning of short squeezing.
I wouldn’t dare bet against Reddit’s crowd at this critical crossroads, either via shorts or those pricey short-dated put options. Given the recent action in Reddit stocks, I think the hands of Reddit’s WallStreetBets have strengthened considerably.
What does the recent action in Reddit stocks mean for you?
BlackBerry stock and the broader basket that have followed in the shadows of AMC stock may not be so quick to implode as they did back in January. If I were to place a bet, I’d look for BlackBerry stock to fluctuate wildly between $15 and $20. Undoubtedly, the wildly volatile environment has made the stock a trader’s playground. And the fundamentals don’t seem to matter as much to those looking to make a quick buck off the beloved Canadian smartphone turned enterprise software company.
If you’re looking to buy and hold BlackBerry for years or decades at a time, I’d wait until the stock can flirt with the lower end of the trading range. The patient may be able to punch their ticket in the single digits if the Reddit diamond hands start getting tired into the summer. I don’t think they will, but there’s always a chance that the crowd may start doing a bit of profit-taking, as they “betray” their diamond-handed comrades.
But if you’re a seasoned trader who’s looking to take advantage of the action in Canada’s lone Reddit stock, I wouldn’t at all be against jumping in here, as long as you understand what you could lose (I’d pin the downside risk at around 40-50%). Just make sure you take profits before other investors turn on you, because it’ll be a tough uphill road to recover from a double-digit percentage loss, given BlackBerry stock seems a tad overvalued here.
While BlackBerry is nowhere near as overvalued as AMC (at least in my humble opinion), investors should be mindful that BlackBerry is no longer a deep-value play; it’s a momentum trade, and it’ll probably be this way throughout the summer.
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 Joey Frenette has no position in any of the stocks mentioned. The Motley Fool recommends BlackBerry.