Best Buy Reports Earnings Under ‘Death Cross’

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Daily technical chart showing the performance of Best Buy Co., Inc. (BBY) stock


Consumer durables retailer Best Buy Co., Inc. (BBY) reports earnings before the opening bell on Tuesday, Nov. 20, with the stock under a “death cross” that just formed on its daily chart a week ago. The weekly chart provides an additional warning, having become negative at the end of the week of Oct. 5. The stock closed Friday, Nov. 16, at $66.43, down 3% year to date and in bear market territory at 21.3% below its all-time intraday high of $84.37 set on Aug. 22. The stock set its 2018 low of $64.81 last week on Nov. 15.

The retailer of refrigerators and televisions will report quarterly earnings before the opening bell on Tuesday, and analysts expect the company to post earnings per share of 85 cents to 93 cents. Zacks Equity Research says that Best Buy is well positioned to maintain its long string of quarterly earnings beats. Daily and weekly charts challenge this notion.

The daily chart for Best Buy

Courtesy of MetaStock Xenith

Best Buy began 2018 above a “golden cross” set back on Aug. 3, 2016, when the stock closed at $33.41. This bullish chart signal tracked the stock to its all-time intraday high of $84.37 set on Aug. 22. On Aug. 28, the retailer reported an earnings beat, but disappointing guidance resulted in weakness to $74.76, which lines up with the horizontal line at $75.03 that represents my risky level for November. This risky level was tested on Nov. 2 as an opportunity to reduce holdings.

Then, on Nov. 14, a “death cross” occurred in which the 50-day simple moving average fell below the 200-day simple moving average, indicating that lower prices would follow. This led to the 2018 low of $64.81 set on Nov. 15. The stock is below my semiannual pivot of $69.43, which is the second horizontal line.

The weekly chart for Best Buy

Weekly technical chart showing the performance of Best Buy Co., Inc. (BBY) stockCourtesy of MetaStock Xenith

The weekly chart for Best Buy is negative but oversold, with the stock below its five-week modified moving average of $71.20, which indicates risk to the 200-week simple moving average at $48.67 as the “reversion to the mean.” The 12 x 3 x 3 weekly slow stochastic reading ended last week at 19.66, falling below the oversold threshold of 20.00.

Given these charts and analysis, investors should buy Best Buy shares on weakness to the 200-week simple moving average at $38.67 and reduce holdings on strength to my monthly risky level at $75.02. My semiannual pivot is at $69.43.

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.



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