How to Trade Best Buy After Earnings and Ahead of Black Friday

Best Buy is scheduled to report earnings on Tuesday before the open, just a few days ahead of Black Friday. Here's how to trade the stock.
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As we near the holidays, Best Buy  (BBY) - Get Report will be on investors’ radar. But even before then, the Richfield, Minn., electronics retailer will be in focus since it's scheduled to release its third-quarter report ahead of the open on Tuesday.

Obviously, earnings will drive the narrative in the short term and in this holiday-shortened trading week. But as we as enter the last weeks of 2020, investors will want to know one main thing: Will sales growth remain strong? 

They’ll want to know whether the pandemic is driving strong revenue, as students and work-from-home employees stock up on office equipment. They’ll also want to hear positive commentary surrounding guidance and holiday sales. 

A lot of focus is shifting to Target  (TGT) - Get Report, Walmart  (WMT) - Get Report, Amazon  (AMZN) - Get Report and others ahead of Black Friday and the holiday shopping season. 

The bulls will want some confidence that Best Buy is going to be a part of that conversation as well.

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Trading Best Buy Stock

Daily chart of Best Buy stock.

Daily chart of Best Buy stock.

At a glance, the charts are relatively straightforward with Best Buy stock.

The shares are trending from the lower left to the upper right. The 50-day moving average has been support since mid-June and resistance has become stout near $123.

In a world where earnings weren’t just around the corner, the bulls would likely be playing this name for an upside breakout ahead of Black Friday.

Of course, a breakout is still a possible reaction, but so, too, is a decline. Many traders will wait until after the report is out to take a position in Best Buy.

Should the shares break out and clear $125, let’s see whether Best Buy can clear the two-times range extension and channel resistance near $133.

Above that could open the door to a possible run to $150 and, eventually, a longer term price target using the 261.8% extension near $160.

On the downside, a correction can be bought so long as support holds strong. In this case, that’s the $114.50 to $116.50 area.

In that zone, Best Buy stock finds the 161.8% extension — which was resistance when Best Buy last reported earnings — as well as the 20-day and 50-day moving averages.

Below opens the door to a test of the October and November lows near $110 and the 100-day moving average.