The retailer’s shares are jumping after it hired a former Target exec as its CEO, but whether the rise constitutes a breakout gap is unclear at this point.
Bed Bath & Beyond Inc. (BBBY) is the Stock of the Day here at Real Money after the retailer announced the hiring of Mark Tritton, Target Corp.’s (TGT) chief merchandising officer, for the CEO job and a number of retail analysts have published positive comments. Bed Bath & Beyond’s stock price was up around 18% before Thursday’s opening bell on the news. Will this really improve the chart picture of BBBY or will this be a flash in pan, so to speak? Let’s check out the charts and indicators.
In this daily bar chart of BBBY, below, we can see that the stock price of this retailer has not fared well since early April. Prices have slumped from above $19 to nearly $7 is just a few months. Prices have recovered a little from an August low to trade above the bottoming 50-day moving average line. BBBY is still below the bottoming 200-day moving average line, but a rally to around the $12 here on Thursday will put the stock much closer to this long-term indicator. The On-Balance-Volume (OBV) line has improved from the middle of August and tells us that we are seeing a shift from aggressive selling to aggressive buying. The Moving Average Convergence Divergence (MACD) moved above the zero line in September for an outright go long signal.
In this weekly bar chart of BBBY, below, we can see an improving picture. Prices are still below the 40-week moving average line but the line is starting to bottom. If Thursday’s rally can hold through Friday’s close we could be testing the underside of the 40-week line and maybe close above it. The weekly OBV line shows improvement the past two months and the MAC oscillator has crossed to the upside for a cover shorts buy signal.
In this Point and Figure chart of BBBY, below, we can see a potential upside price target in the $12-$13 area. This target was calculated through Wednesday’s close, so we may have a higher price target later here on Thursday. Meanwhile, this is a good start.
Bottom line strategy: The key question is whether the charts have improved enough to recommend a long position. BBBY is likely to gap higher here on Thursday but I do not currently feel this will be a breakout gap. I suggest prices could soon retreat and retest the $11 area. Traders could then approach the long side of BBBY, risking below $10.
Author: Bruce Kamich
Source: Real Money: Bed Bath & Beyond Shakes Up the Retail Market and the Charts, Too