Electronics and appliance retailer Best Buy (NYSE:BBY) has experienced some turbulence lately, which has put BBY stock off its year-to-date highs. But that recent struggle leads us to a promising opportunity in BBY.
I still remember the days in high school when an exciting Saturday morning activity was strolling through electronics retailers like Circuit City (out of business now for years) and Best Buy. Nowadays, while I still enjoy visiting Best Buy to get my hands on some electronics and gadgets, I find that online research and ordering have become my preferred way to purchase electronics.
Not to state the obvious, but I obviously am not alone in this trend. The structural demise of the classic retailer (electronics or otherwise) will, in my eye, continue to keep a lid on stock prices of companies like Best Buy. To be clear, that is not to say they have to go out of business, but I don’t see how Best Buy will become a sexy growth story again anytime soon.
BBY Stock Charts
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Moving on to the charts we see that on the multi-year weekly chart Best Buy stock has mostly traded in a well-defined range. In 2018, the stock overshot the range, which ultimately led to a break back into the trading range where, by late December 2018, the lower area of the range was revisited. Mean-reversion is a powerful thing in markets.
The rally off the late 2018 lows then pushed BBY stock right back to the upper end of said trading range, where it promptly got rejected yet again and has been pushing lower since April. In my eye, the path of least resistance is lower toward the low end of the trading range.
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On the daily chart, we see that since BBY stock got rejected at the upper end of the trading range in April, it has fallen about 17%, slicing through its intermediate-term moving averages, which now act as a layer of technical resistance above.
Even the broader stock market rally of the past couple of days couldn’t lift BBY stock, which is why I think it’s trading short here around the $63 area, with downside target at $59 and a stop loss at $67.
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