Publish date:

Bed Bath & Beyond Must Hold This Level After Huge Earnings Rally

Bed Bath & Beyond stock erupts higher on Thursday, climbing more than 30% on better-than-expected earnings. Here's the level it has to hold now.

What a week it has been for Bed Bath & Beyond  (BBBY) - Get Bed Bath & Beyond Inc. Report. Shares are up about 40% so far, helped along by the stock’s 33% gain on Thursday.

The move came after the company delivered better-than-expected earnings.

The struggling retailer generated non-GAAP earnings of 50 cents a share, easily beating expectations by 79 cents. Revenue of $2.69 billion sank just 1.1% year over year and beat expectations by $70 million.

The impressive results weren’t contained to just the headline numbers. Comp-store sales growth of 6% breezed past estimates looking for a 2.1% contraction.

Bed Bath & Beyond also increased its gross margins - which topped expectations - while also generating positive free cash flow, cutting down its gross debt and boosting liquidity.

Given the struggle the stock has faced, it’s no wonder to see it popping higher now. It looks like Wedbush was right with its pre-earnings call. But what now? 

Trading Bed Bath & Beyond Stock

Daily chart of Bed Bath & Beyond stock.

Daily chart of Bed Bath & Beyond stock.

TheStreet Recommends

This week’s rally has ignited a very important move in Bed Bath & Beyond stock. Not only is it catapulting the share price over the 200-week moving average, but it’s reclaiming the $17.50 mark.

Reclaiming $17.50 is more significant to me than the 200-week moving average. This was a notable support level in years past, but after breaking down in 2018, it became stiff resistance in 2019 and 2020.

Then the coronavirus came along, which clearly crushed the stock. After recouping its losses off the lows, Bed Bath & Beyond stock had put together a sturdy rally that’s now becoming explosive.

From here, bulls need to see the $17.50 mark become support. That is necessary for the long-term technicals to shift in its favor. It helps that the 200-week moving average is nearby.

On the upside, consider using extensions from the 2020 low to the December 2019 high. Doing so may help define potential upside targets.

Short-term traders may be looking at the $20 level and the 123.6% extension at $20.69 as one area of interest. Above that opens the door to the 138.2% and 161.8% extensions, at $22.73 and $26.02, respectively.

For now, the bulls are back in control, but that can change at almost any time with this name. Keep an eye on that critical level of support.