Trader's alert: Buy BBRY.

I first mentioned BBRY (formally Research In Motion, ticker RIMM) in these pages back in mid December 2013.  The shares were trading at $6 at the time.  As you can see from the recent chart, the shares then went on to nearly double from that point.  However, knowing that nothing goes straight up or straight down, I modeled in this post that I expected a pullback to $7.  While I was early in that call, the shares have indeed now pulled back to $7 and have now likely begun their rapid rise into a 3rd wave up.

Zooming in, I show that 1 of 3 has already played out and then 2 of 3 finished as well.  The gap you see within the red circle is just 3 of 1 of 3.  The gaps will get bigger as the shorts are forced to cover in a panic by an overwhelming hoard of momo players.  The sell trigger is anything lower than $7.20.  This is about as good as it gets folks.  BBRY is not going to BK and it is not going to be broken up.  The new management has cut headcount and is now beginning to build product momentum again.  Hear me now and believe me later: the upside on this one can be 10x.  Why?  Because $70 was the level of the prior 4th of course.  This thing was once at $235 and there are a lot of short sellers who jumped in on the way down.  They all have to cover now.

With expenses now under control, a new focus on customers and on delivering products and $2.5 billion in cash vs only $1.63 billion in debt, price/sales of .56 (that is zero dot five six people) and price/book of only 1.04 (priced for BK when BK is not going to happen), BBRY is very compelling at this level.  When the charts and the fundamentals line up like this, you just have to play it.

But play it does mean play it because if the broader markets enter a collapse (which I think is long overdue), then BBRY could be sucked down with everything else.  After all, what is a paper asset really worth when there are massive margin calls happening all over the place?  Answer: whatever you can get for it.  Because of the toppiness of the broader markets we do have to consider the possible downside to BBRY and that could occur in the form of an ending diagonal as shown below.  We could just be finishing up the B wave of the a-b-c into wave 5. If this happens I expect a throw under that could take the shares to the $2-$3 range.  If you see that, know that it will not last very long.  That would be like buying a non-expiring call on a company that has enough cash to last for quite some time.  If the chart breaks out of the top orange trend line at any time from here on, the chances are that it has started a new bull market.

Bottom line: buy any time, sell if it breaks down below the trigger level of $7.20 and if that happens look for a trip to the bottom of the channel for your next buying opportunity.  Either that or buy a quarter position here and then cost average into a full share if the price goes down significantly.  It will not stay down forever.