Chart of the Day – $BBBY: Blood Bath & Beyond

by Dan January 9, 2015 11:56 am • Chart of the Day

Shares of Bed Bath and Beyond (BBBY) are down 8% this morning after analysts called the quarter just reported “low quality” with earnings that benefited from a lower than expected tax rate and share buybacks. As we head into Q4 reporting season I think it makes sense to get used to that sort of earnings quality, despite what appears to be a strengthening domestic economy with the benefit of lower oil.  BBBY should have been the very sort of company (with little to no dollar exposure) to display confidence in the jobs recovery and benefits of lower oil, but investors are punishing the stock, now down 8%.

What’s interesting about the price action today is that it comes from the 52 week highs and not far off of the all time highs made in early January 2014:

BBBY 5yr chart from Bloomberg
BBBY 5yr chart from Bloomberg

Technical rejections based on poor fundamental news is not the sort of weakness you want to be early on picking a bottom. I suspect we see this stock with a 6 handle in the not too distant future.

There are other retailers with similar charts. Some have broken out to the upside while others like RL look less than attractive all of a sudden. I suspect that Q4 results will be far less important for most U.S. retailers as their forward guidance and if the perceived benefit of lower oil will be enough to offer forward guidance that at least matches the sector’s recent enthusiasm.

Here is our open bearish trade in XRT from Nov, and managed in Dec:  Trade Update – $XRT: Rolling Put Calendar to Vertical