NEW YORK (TheStreet) -- This week investors learned the housing market is heating up. New home sales rose 2.2% in May to an annual pace of 546,000 units, the highest level since Feb. 2008. Sales of existing home climbed 5.1% to an annual rate of 5.35 million, a rate not seen since Nov. 2009. Bed Bath & Beyond (BBBY), the retailer of many products and gadgets for the home should benefit has home buyers furnishing their new abodes.
Shares of Bed Bath & Beyond has not performed well so far in 2015 with its daily chart showing a "death cross," and with its weekly chart negative. Nonetheless, the stock is poised for a positive reaction to earnings if the company gives investors positive guidance related to the improving housing market.
Analysts expect Bed Bath & Beyond to earn 94 cents a share after the closing bell on Wednesday. Some say that the stock could rally more than usual on an earnings beat on a potential short squeeze. Others say that weaker- than-expected fourth-quarter earnings and rise in costs could spill over into the quarter ending in May.
Whenever there are mixed fundamental opinions about a company pre-earnings, it's important to also look at "must see" daily and weekly charts for the stock and know the key technical levels at which to buy on weakness and at which to sell on strength.
Here's the daily chart for Bed Bath & Beyond.
Bed Bath & Beyond had a close of $70.75 on Tuesday, down 7.1% and below what market technicians call a "death cross" where the 50-day simple moving average of $71.13 is below the 200-day simple moving average of $71.83. The stock is 12.5% below its all-time intraday high of $80.82 set on Jan. 3, 2014.
The price gaps shown on the chart correspond to positive and negative reactions to earnings on Jan. 9, 2014, April 10, 2014, June 26, 2014, Sept. 24, 2014, Jan. 9, 2015 and April 9.
A positive reaction to earnings on Wednesday should have the stock above the 50-day and 200-day simple moving averages at the open on Thursday.
Here's the weekly chart for Bed Bath & Beyond.
Courtesy of MetaStock Xenith
The weekly chart for Bed Bath & Beyond stays negative if the stock closes this week on Friday below its key weekly moving average of $71.29. The momentum reading for the stock is projected to decline to 20.34 from a reading of 27.77 on June 19.
A positive reaction to earnings should result in a weekly close on Friday above the key weekly moving average of $71.29.
Investors looking to buy Bed Bath & Beyond should place a good till canceled limit order to purchase the stock if it drops to $69.82, which is a key level on technical charts until the end of this week.
Investors looking to reduce holdings should place a good till canceled limit order to sell the stock if the stock rises to $79.99, which is a key level on technical charts until the end of June.
Investors not familiar with technical analysis should begin with the notion that a price chart for a stock shows a road map of past price performance, which provides guidance for predicting future share price direction.
Here's how to read a daily chart. There are two moving averages to follow; the 50-day simple moving average is in blue while the 200-day simple moving average is in green.
Here's how to read a weekly chart. This chart shows weekly price bars going back to the beginning of 2007 and thus includes the Crash of 2008, then the current bull market for stocks that began in March 2009. The red line tracks the ups and downs of the key weekly moving average. The green line is the 200-week simple moving average. The red line that oscillates along the bottom of the chart is the momentum reading on a scale of 00.00 to 100.00. A reading below 20.00 is oversold and a reading above 80.00 is overbought.
A technically positive weekly chart occurs when a stock ends a week above its key weekly moving average with the momentum reading rising above 20.00.
A technically negative weekly chart occurs when a stock ends a week below its key weekly moving average with the momentum reading declining below 80.00.