One Number Tells You If the "Black Sheep" of Smartphones Is Really Making a Comeback

Tom Gentile

When following the news over these past several weeks, you'd think that Apple Inc. (Nasdaq: AAPL) and Samsung Electronics Co. Ltd. (OTCMKTS: SSNLF) are the only companies out there making cell phones.

But before the iPhone and Galaxy Note 7 rolled out, there was another provider dominating the smartphone world that's not quite "dead" yet…

I'm talking about BlackBerry Inc. (Nasdaq: BBRY).

Now I know what you're probably thinking… but hang on a second.

Yes, they're losing money year after year. And you probably haven't seen anyone using a BlackBerry in a long time.

But they're establishing a new identity, with a new source of revenue.

And whether or not they succeed depends on this one number…

How BlackBerry's 200-Day Simple Moving Average Will Determine Its Fate

Last November, BlackBerry CEO John Chen said that BlackBerry would stop designing and developing its own smartphones if it couldn't sell between 3 million and 5 million phones to break even. But in the first half of this year alone, it's only sold about 900,000 phones. So, standing by his word, Chen announced on Sept. 28 that BlackBerry is finally done designing and building its own phones.

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Now Chen is working his tail off, I imagine, to re-create BlackBerry's identity from smartphone provider to software servicer. And while discontinuing its hardware sales may result in losses in the short term, you do also want to consider the fact that it no longer faces losses from inventory write-offs. But it's just too early to tell if this will help or hurt BlackBerry (even more) over the long haul.

So the question right now is… do you buy the stock, sell the stock, or stay away from it altogether?

And the answer lies in the 200-day simple moving average (or SMA).

The SMA is a simple technical analysis tool that gives you the average price data of a stock or exchange-traded fund (ETF) over a specific time period (you can tailor it to whatever timeframe you like, making it a good tool for both short-term and long-term trades). You can calculate it yourself by adding up the prices and dividing by the number. So to find the 200-day SMA for BBRY, you'd add up the last 200 prices and divide by 200. If you were looking for, say, the 50-day SMA, you'd add up the last 50 prices and divide by 50.

Take a look at BBRY's year-to-date price movements…

From a technical stance, the only positive thing I see here is that it's now nestling on top of its 200-day SMA. And there's just two directions it can go from here that will tell you whether or not BBRY is worth your time and your money:

1. BBRY crosses over its 200-day SMA: This is a bullish indicator and signals higher share prices to come.
2. BBRY drops below its 200-day SMA: This is a bearish indicator and signals lower share prices to come.

The (Much) Less "Risky" Stock to Put Your Money On

Tom Gentile

About the Author

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Tom Gentile, options trading specialist for Money Map Press, is widely known as America's No. 1 Pattern Trader thanks to his nearly 30 years of experience spotting lucrative patterns in options trading. Tom has taught over 300,000 traders his option trading secrets in a variety of settings, including seminars and workshops. He's also a bestselling author of eight books and training courses.

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