NEW YORK ( TheStreet) -- Shares of Best Buy ( BBY) have been on a roller-coaster ride since setting a multiyear intraday low at $11.20 at the end of 2012. The stock gained nearly 300% to a multiyear intraday high at $44.66 on Nov. 13, 2013, just before last year's holiday season.
Then, on Jan. 16, the retailer of appliances, high-definition TVs and electronics reported disappointing holiday sales. Shares were sliced by 50% from the high to as low as $22.15 on Jan 31. This backdrop of extreme volatility is important as the stock has returned to momentum status going into the 2014 holiday season.
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Best Buy shares are up 62% from its Jan. 31 low to a recent high at $35.96 set on Monday.
Analysts expect Best Buy to earn 25 cents a share when it reports quarterly results before the opening bell on Thursday. Helping the stock's return to momentum status were better-than-expected quarterly earnings reports released on Feb. 27, May 22 and Aug. 26. A warning from one analyst is that Best Buy "has had 14 consecutive quarters of declining operating margins."
By definition, a momentum stock has a positive weekly chart defined by a weekly close above a key moving average with rising weekly technical momentum. Investing or trading any momentum stock should be done employing an exit strategy to lock in gains, and limit losses if a stock suffers a jolt of downside volatility.
Here's how to trade Best Buy.
Investors in Best Buy ($35.88) shares should enter a "good 'til canceled" limit order to sell strength to a key technical level at $41.15 and employ a sell-stop below its key weekly moving average at $33.80 keeping in mind that this average will rise each week.
If you are looking to buy Best Buy on weakness enter a "good 'til canceled" limit order to buy weakness to a key technical levels at $30.60 and $27.50.
Here's the daily chart for Best Buy.
Courtesy of MetaStock Xenith
The daily chart for Best Buy shows that the stock's 2013 momentum run-up solidified when shares closed above its 200-day simple moving average (green line) at $16.77 back on March 1, 2013. The crash on Jan. 16 put the stock well below its 200-day SMA then at $33.74. The 200-day SMA was barrier until August 20 and the stock is currently well above its 200-day SMA at $29.16.
The daily chart clearly shows the near 300% rise in 2013, the 50% crash to the Jan. 31 low and the 62% gain to Monday's high.
Here's the weekly chart for Best Buy.¿
Courtesy of MetaStock Xenith
The weekly chart for Best Buy is positive with the key weekly moving average at $33.80. The momentum reading shown in red at the bottom of the graph has been rising and is closing in on becoming overbought with a reading at 78.90 versus the overbought threshold at 80.00. Best Buy is solidly above its 200-week simple moving average (green line) at $26.62.
At the time of publication the author held no positions in any of the stocks mentioned.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.