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Trading Bed Bath & Beyond After Earnings Rally Unravels

Bed Bath & Beyond shares are up on the day but well off the highs after reporting a mixed quarter. Here's how to trade it from here.

Bed Bath & Beyond  (BBBY) - Get Bed Bath & Beyond Inc. Report shares have been all over the map on Wednesday, with perhaps a bit of “meme-ness” sprinkled on top.

Shares were still up about 10% on the day after the company reported a mixed quarter but better-than-expected guidance.

At one point Wednesday though, shares were up more than 30%. In premarket trading, shares were actually lower on the day, then flat as the open approached.

So depending on how you look at the current gains, you can either take a glass half-full or glass half-empty approach.

For Jim Cramer’s part, he’s sticking with Bed Bath & Beyond, a retailer he liked even before the short-squeeze craze pushed it above $50 earlier this year.

That’s when GameStop  (GME) - Get GameStop Corp. Class A Report, AMC Entertainment  (AMC) - Get AMC Entertainment Holdings, Inc. Class A Report and others were driving the narrative.

With earnings out of the way what do the charts say?

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Trading Bed Bath & Beyond

Daily chart of Bed Bath & Beyond stock.

Daily chart of Bed Bath & Beyond stock.

Coming into Thursday’s session, Bed Bath & Beyond was hovering near the $30 mark. It was being rejected by the 21-day moving average, but holding the 10-day.

I wanted to see the stock close above last week’s high at $32.15. That seemed like a tough ask, considering it was about 10% above the stock’s current price. That was even more true after the company reported earnings and shares traded lower ahead of the open.

But then the stock went ballistic, rallying up toward $40 before being rejected by the 50% retracement. That retracement has given the stock trouble over the last few months.

Now we need to see if the stock can stay above $32.15, particularly for the week. If it can do that, perhaps we can get a move back up toward $35.

That would obviously put the 50% retracement back in play, but also the post-earnings high at $39.30. Above that puts the 61.8% retracement on the table, then the June high at $44.51.

On the downside, a move below the $30 mark and the 10-day moving average should draw in solid support from the $28 to $29 zone. Near this area, Bed Bath & Beyond stock finds various daily and weekly moving averages.

Based on the post-earnings rally, the bias should be to the upside. However, it’s also pretty disheartening to see the stock unravel so quickly from the highs. Keep the $32.15 level on your radar in the short term.