Shares of home furnishing retailer Bed Bath & Beyond (BBBY) have held up well vs. the broader stock market in recent weeks. This type of relative strength is particularly noteworthy given the company’s indirect exposure to housing stocks, which have traded well lower.
Active investors and traders could eye the stock for a break past recent highs, which could accelerate upside momentum for BBBY stock.
After the close of trading on Sept. 23, Bed Bath & Beyond reported better-than-expected second-quarter earnings that grew 1% to $1.17 vs. the estimated $1.14. Revenue for the quarter came in 5% higher at $2.95, better than analyst estimates for 2.89 billion. On the back of this news, BBBY stock rallied more than 7%, pushing the stock into a technically more sound position from which it could make another leap.
However, through the lens of the multiyear chart, BBBY remains in a decidedly more neutral position.
BBBY Stock Charts
In 2013, BBBY stock managed to push past its 2012 highs and to fresh all-time highs. But things quickly turned sour as the stock fell sharply in January 2014 and in just three weeks erased a rally that took the stock 10 months to complete. By April, the stock then also sliced below its late 2008 uptrend line until finally in June revisiting its December 2012 lows. Shares of BBBY then staged a quick V-shaped reversal that has since brought them back toward the underbelly of the 2008 uptrend line.
The bears will point out that the stock’s bounce off the June lows has so far barely brought it back toward the middle of a multiyear range. As such, the stock isn’t yet out of the woods from a longer-term view, but that doesn’t mean the recent relative strength in the stock doesn’t offer opportunity in the nearer-term.
On the daily chart, the bullish nature of the June bottom in BBBY stock is more easily seen. Note that the selloff on June 26 was quickly reversed over the ensuing couple of weeks. The stock then began basing higher, and with the post-earnings breakaway gap rally on Sept. 24 also broke back above its down-sloping 200-day simple moving average (red line) for the first time since January. The price action since then has been constructive as the stock consolidated the Sept. 24 rally by retesting the 200-day from above.
The two-week consolidation period can now also be looked at as a bullish flag pattern, which would resolve to the upside at the latest on a break past $67.50. Active investors could thus look to get long BBBY stock on a break past the $67.50 area for a move toward $72, which is the lower end of the big gap down from January (blue box).
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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.
