Summary
- Firm has received a slew of upgrades recently.
- Shares came back down to test recent breakaway gap.
- We like the risk/reward setup here.
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Traders who did not buy the breakout in Bed Bath & Beyond Inc. (BBBY) at the tail end of March may have another opportunity here to get some long exposure. We were actually long this stock in the initial stages of our portfolio but cut it when we saw that there was no stop in sight to the repeated pattern of lower highs and lower lows. The bearish pattern which commenced in 2015 finally bottomed out last December with the market in general. What value investors want to know though in earnest is if those Christmas Eve lows last year will end up being multi-year hard lows for this stock.
As the chart shows below, we do not have any clear technical pattern being played out yet. Although price has dropped meaningfully over the past few weeks, shares continue to remain trading above that breakaway gap which printed in late March. It is very important we remain above the trend-line drawn in the chart. Any convincing move below this support level would most likely result in a significant wave of selling. Worryingly, the recent down-move drove the 4-day moving average below both the 9-day and 18-day. This is actually giving a selling signal, so it will be interesting to see if this plays out.
From a bullish perspective though, one can get pretty close to the trend-line and place a stop right underneath it in case it gets breached. Both from a valuation and dividend perspective, Bed Bath & Beyond definitely should continue to attract value investors if shares can rally from this point. Let's explain why in more detail.
