Bed Bath & Beyond (NASDAQ:BBBY) took a big slip following earnings. But after getting partially upright, a bigger fall still looks to be in the offing for BBBY stock. Let me explain.
Last week’s third-quarter earnings confessional was a doozy for BBBY stock after the former retail giant continued to show growing cracks in its business. Headlining, Bed Bath & Beyond swung to a massive and unexpected loss of 38 cents versus Street forecasts of a 2 cent profit. The miss was ugly and so was Wall Street’s reaction as shares tumbled 19% on the session.
But investors had other reasons to throw in the towel as well. Bed Bath & Beyond announced same-store sales fell 8.3% year-over-year. Sales also came up short of estimates. And under the command of its new CEO, the company pulled the plug on its fiscal 2019 guidance citing continued sales and earnings pressure.
The dismal results come amid accelerating bearish trends and are also a byproduct of Bed Bath & Beyond’s inability to adapt to today’s e-commerce environment. And it’s not exactly a secret that Amazon (NASDAQ:AMZN) and others like Target (NYSE:TGT) or Walmart (NYSE:WMT) have pilfered the company’s once-dominant retail niche.
Could conditions get any worse for BBBY stock and its retail apocalypse? There is some optimism under the company’s new leadership that shares deserve the benefit of the doubt. And the CEO is off to a quick start. BBBY’s management team has been retooled and a sale-leaseback scheme has been well-received. Still, one look at the price chart and I see a more damaging fall for shares in 2020.
BBBY Stock Daily Chart
Source: Charts by TradingView
It’s what defines a trend in motion for many investors. I’m referring to a stock’s series of highs and lows. When that sequence plays out with price action showing lower highs and lower lows, the trend in progress is bearish. This type of trend is nothing new for BBBY stock. Right now though, conditions have grown more determined in forecasting a weaker share price in 2020.
Aside from the large decline in BBBY stock following earnings, the fallout firmly established 2009’s financial crisis monthly “closing” low as resistance. A look at the detailed weekly chart shows how this technical line in-the-sand has increasingly failed bullish investors since late 2017. Supportive challenges have fallen to the wayside and the declines have become increasingly fierce. And now past support has turned into full-blown resistance.
Market Maker Edge: Currently and a handful of sessions into an unwinding of last week’s oversold reaction, BBBY stock sets up as a counter-trend shorting opportunity. I’d respect a price breach of resistance as strong technical evidence to exit the position and cut losses. Alternatively, the April $13 / $10 bear put spread looks well-positioned for big-time risk-adjusted profits.
Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies and related musings, follow Chris on Twitter @Options_CAT and StockTwits.