In recent weeks, shares of home furnishing retailer Bed Bath & Beyond Inc. (BBBY) continued their ascent off deeply oversold readings from June, which last week brought them back up to the next technically significant area of resistance. Like the broader market, BBBY stock looks to be exhausted in the near-term, but it’s still constructively positioned from a multiweek/multimonth lens.
The last big data point for Bed Bath & Beyond was its earnings report on Sept. 23, which it passed in flying colors, sending the stock higher. As I discussed on Oct. 10, this then set BBBY stock up for another push higher toward the $70 area as a next upside target.
With last week’s rally, Bed Bath has reached this target.
While BBBY has traded very closely with the daily swings in the broader market recently — not surprising given the increase in correlation when markets get volatile — there still is plenty of chatter saying that activist investor Carl Icahn is eying the company for a potential move. It doesn’t look like there is much of an “Icahn premium” priced into the stock, but should the activist announce his involvement with the company, it likely would send BBBY on an upward spike.
At the same time, Bed Bath & Beyond repurchased much stock in the latest quarter, which has some market participants speculating over a potential takeover deal in the making.
BBBY Stock Charts
Looking at the multiyear weekly chart, BBBY touched the underbelly of its late 2008 uptrend line last week, which it broke below in April. As the stock got sold into June, it quickly bounced and rebounded off horizontal resistance that dates back to late 2012, in the low to mid-$50s. Meanwhile, the longer-term momentum indicator, the Relative Strength Index (RSI), has also curled back up, looking ripe to push higher still.
On the daily chart, note that as BBBY stock pulled back in early October along with the broader market, it found support at its 100-day simple moving average after pushing back above it in August. This moving average has offered active traders and investors with a good reference point to focus around and again did so in October. Last Friday, the stock reached its previous lateral resistance area from March and April, which also is the bottom of the down-gap from January (see the black horizontal line).
Barring any outside news, BBBY stock now looks to be in a good spot to consolidate before making a run at the January down-gap. Active types can look to buy the stock on a pullback into the $67-$67.50 area, or on a breakout past the $70 mark on a daily closing basis for a move into $75-$77.50.
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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.
