Retail stocks continue to suffer through a poor earnings season as results and outlooks have given traders reason to sell this already weakened group. The latest victims in the sector include Bed Bath & Beyond Inc. (NASDAQ:BBBY), Best Buy Co Inc (NYSE:BBY) and Costco Wholesale Corporation (NASDAQ:COST).
Beyond Bed Bath & Beyond Inc. (BBBY)
While it doesn’t report quarterly results until April 5, Beyond Bed Bath & Beyond shares have been locked in a bearish pattern fueled lately by results from peer companies like Target Corporation (NYSE:TGT) and Kohl’s Corporation (NYSE:KSS).
The stock had been consolidating around $40 since its last quarterly results disappointed investors, but now a declining 50-day moving average has some potential ramifications on the short-term outlook for the shares.
We’re seeing all three of the major trendlines (50-, 100- and 200-day) trend lower, confirming the bearish outlook. As of two weeks ago, the 50-day from BBY stock came directly into play, though, as the trendline began applying direct pressure to prices. Bed Bath & Beyond shares haven’t reached an oversold signal yet, which means that we’re not likely to see a dead cat bounce from the stock. In addition, the 50-day is now moving through the $40 level itself.
Watch for BBBY stock at $39, as this has been a double bottom for shares within the past six months. A break of this mark will target $36, almost another 10% decline.
Best Buy Co Inc. (BBY)
Best Buy disappointed on its sales numbers in the last report. Also, provided low visibility about the potential for the sales figures to change in the near and long-term future.
The earnings report interrupted a long-term bullish trend in the stock and now has shares reversing course as the 50-day is transitioning into a declining pattern.
Currently, shares are trading below their 50-day and just above the 100-day, creating a technical squeeze play. Support at the 100-day trendline, currently at $43.50 may slow the progress of the bearish transition.
Failure for the 100-day to hold shares in their intermediate-term bullish trend will result in a likely test of $40, which is where the stock spent three months consolidating through the last quarter of 2016.
Costco Wholesale Corporation (COST)
Costco had been one of the relative strength leaders in the retail sector as the membership warehouse had seen a rally from the improvements to its last two quarter’s earnings results. The improvement drove Costco shares 25% higher from its November bottom up to last week’s earnings announcement.
Since the announcement, shares have given back 6% to find themselves sitting on its 50-day moving average for the first time since this rally began.
The first touch of the 50-day incurred a surge in volume as traders appear ready to defend the important trendline. This is bullish for the short-term on Costco shares.
In addition, COST stock has now dipped into oversold territory on the rapid decline in value. This suggests that we are likely to see buyers come in to grab this relative technical value for a short-term trade at minimum.
All eyes will remain on $167 for Costco, which appears to be a good short-term trade given the initial show of force from the technicals.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
