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Best Buy Co Inc (NYSE:BBY) shot higher last November after reporting better-than-expected earnings results, but the stock is on the verge of breaking back down into the gap that formed post-earnings. We anticipate that once the stock sees a close below $42.55 (the low on Nov. 17) it will continue to fall back down toward the bottom of the gap at ~$40.

Retail stocks have been taking a hit during the past few weeks as concerns over stagnant personal-income numbers and mixed consumer confidence numbers have led many to question whether the sector is overvalued. BBY has made some positive changes in its business model to more effectively compete with Amazon.com, Inc. (NASDAQ:AMZN) — but AMZN continues to grab market share, and according to last month’s retail sales numbers, electronics and appliance sales were down by 4%. We don’t expect to see a huge pick up in these areas, especially if the Trump administration makes good on its threats to impose tariffs on goods imported from China.

‘Buy to open’ the BBY February 40 Puts (BBY170217P00040000) for a maximum price of $1.10.

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