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Buy the Dip in Best Buy? Here's What the Charts Says

Best Buy stock is rallying off the lows but is still down after reporting earnings. Support held, but will resistance step back in too?

Best Buy  (BBY) - Get Best Buy Co., Inc. Report stock may be down big on Tuesday, but the buyers are stepping in.

Still down about 13%, shares are well off the lows when Best Buy stock was down almost 17% shortly after the open.

What's triggering the selloff? Earnings, which created selling pressure in premarket trading.

Despite the company beating analysts’ expectations, a soft holiday forecast spooked investors.

We’re actually seeing similar action in other retailers on Tuesday after reporting earnings, like Dick’s Sporting Goods  (DKS) - Get Dick's Sporting Goods, Inc. Report for instance. Shares moved lower on earnings, but are rallying significantly from the session low.

In any regard, investors are wondering if this is a buy-the-dip opportunity in Best Buy given the upcoming holiday sales.

Let’s also not forget that Best Buy rallied more than 37% from the October low to this month’s high, so some type of pullback shouldn’t be too surprising.

Even at today’s low, Best Buy stock was still up 11.2% from the October low. Let’s look at the charts.

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Trading Best Buy Stock

Daily chart of Best Buy stock.

Daily chart of Best Buy stock.

On the day ahead of earnings, Best Buy stock traded up towards its 161.8% extension but reversed from those highs.

In a typical session, one would simply think that’s investors were booking some pre-earnings gains. In reality, it was likely more due to the stock market’s bumpy fall on Monday.

With today’s fall, Best Buy stock opened near the 21-week and 200-day moving averages, where it quickly found buyers.

Unfortunately, the stock is also back below $123 range resistance. Keep in mind just how long Best Buy stock was in a range between $100 and the $120 to $125 area.

It finally broke out earlier this month, but with today’s decline, bulls will want to see Best Buy stock clear $125 before getting overly confident with this one.

Further, it’s still below the 10-week moving average. If the stock can continue higher, these measures — as well as range resistance — will be a key focus going forward.

Rejection from these measures puts the 200-day moving average back on the table.

Above $125 and we can start looking for a retest of the 10-day and 21-day moving averages, followed by a gap-fill up toward $137.