Trade of the Day: Bed Bath & Beyond Inc. (NASDAQ:BBBY)

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We’re recommending a bearish trade on Bed, Bath and Beyond. BBBY has climbed higher with the rest of the market during the past month — likely in large part due to a bit of a short squeeze, thanks to 9.46% of the company’s shares being sold short and a short ratio of 6.43 — but we think the bullish bounce is over. It’s time for the longer-term downtrend to take control.

We don’t expect that much has changed fundamentally for the company. With anemic year-over-year EPS growth rates and negative cash flow growth, BBBY is going to have a hard time making a case for a turnaround.

BBBY

BBBY jumped up to its long-term down-trending resistance level in early March, and the stock has been consolidating below that level ever since. With the company’s earnings announcement coming up on April 6, after the market closes, we expect to see BBBY lose ground and start heading back down toward its recent lows.

‘Buy to open’ the BBBY May 47.50 Puts (BBBY160520P00047500) for a maximum price of $1.70.

We expect the stock to remain within its current consolidation range before ultimately breaking down through support at $49.

InvestorPlace advisers John Jagerson and S. Wade Hansen, both Chartered Market Technician (CMT) designees, are co-founders of LearningMarkets.com, as well as the co-editors of SlingShot Trader, a trading service designed to help you make options profits by trading the news.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/03/bbby-bed-bath-and-beyond/.

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