Could BlackBerry's earnings extend battery life of shares?

Since the beginning of March, BlackBerry’s shares have been falling steadily, and recently fell to $10.00 (£6.70). This suggests that more traders appear to be dreading the report than looking forward to it.

Last quarter’s results were mixed. The good news of its return to profitability on adjusted earnings was offset by a big shortfall in sales.

This time around, the market is expecting a small loss and sales forecasts have been tempered back to essentially match the same as quarter one. The pessimism seen in recent share trading does set up the potential for a positive surprise but many traders would need to see it to believe it, having been disappointed so many times in the past.

The market is expecting the company to report an adjusted loss of $0.04 per share on sales of $794 million (£533 million), an 18 per cent drop from last year. Last quarter, BlackBerry earned a penny adjusted, better than the ($0.05) the market had been expecting, but sales of $793 million were way short of the $931 million (£625 million) expected at the time. Sales were split 46 per cent hardware, 46 per cent services and 8 per cent software/other.

The shares shot up back in January on reports that Samsung could be looking to take it over but then fell right back down once those rumours were squashed. These kind of rumours often pop up around earnings reports and could spark some trading activity.

Going with the assumption that BlackBerry plans to continue operating as an independent company, traders may also be looking for signs of where the company might be heading from here. What are its plans to turn around its struggling hardware business? Could it focus on software and services? Could it put part of its business up for sale?

There’s still a lot of uncertainty surrounding the company and what it could look like in a year or a quarter or even a week from now. This will undoubtedly trigger some activity around this quarter’s earnings news.

Chart Analysis

Since BlackBerry’s last big run came to an end last June, the shares have been trending sideways in a channel between $9.00 (£6) and $12.00 (£8). The failed spike in January completed a double top and since then the shares have been drifting lower.

Earlier this month an attempt to hit $11.00 (£7) failed and since then the shares have been under pressure. RSI falling under 50 and continuing to trend lower indicates growing downward pressure.

The recent break of a trend support line, the 200-day moving average and the $10.00 round number all suggest an emerging downtrend, especially considering that $10.00 has since emerged as new resistance which needs to be conquered to signal an upturn.

Initial downside support tests appear possible at previous lows near $9.35 and $8.75.

As a comparison, through the latter part of 2014 BlackBerry and Apple shares performed similarly, after BlackBerry takeover rumors fizzled out in January.

However, the shares have been heading in opposite directions. Apple shares have continued to climb while BlackBerry stagnated then came under increased pressure over the last few weeks.

Colin Cieszynski is chief market strategist at CMC Markets.