Buy the Dip in Best Buy? Here's What the Charts Says
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.
Chart courtesy of TrendSpider.com
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.
