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Bed Bath & Beyond Shares Are Slumping and the Charts Suggest It May Fall Even Harder

Shares of Bed Bath & Beyond on Thursday have lost about a fifth of their value after the company reported disappointing earnings.

To some extent, this reaction should have been expected. While Bed Bath & Beyond has been taking steps to improve its management and business, the effort is not like flipping a light switch. These things take time, if they happen at all.

Further, the stock had rallied significantly ahead of the print. While Bed Bath & Beyond shares were off the December highs coming into the report, the stock had more than doubled from the August lows.

It’s a perfect candidate for Real Money’s Stock of the Day.

Third-quarter revenue of $2.76 billion declined 8.9% year-over-year and missed estimates by $90 million, while the company’s unexpected loss of 38 cents a share missed analysts’ expectations of a 2-cent profit. Comparable-store sales sank 8.3%, worse than the consensus of a 4.7% drop.

Is the downside reaction enough or could more losses be in store? Let’s look at the charts.

Trading Bed Bath & Beyond Stock

Daily chart of Bed Bath & Beyond. 

Daily chart of Bed Bath & Beyond.

Chart courtesy of Stockcharts.com

The runup from the August lows was breathtaking, particularly for a retailer that’s been struggling for quite some time.

This steep and steady rally allowed a solid uptrend-support mark to form (blue line), which has been in play for months now.

On Thursday though, shares of the Union, N.J., chain cascaded through this mark, gapping below both it and the 50-day moving average.

While the 61.8% retracement from the August low to the December high comes into play at $13.71, I would not feel comfortable staking a position against that mark.

Painful as it may be, the bulls will find a better risk/reward even further below current levels. Specifically, a decline of another 7% to 10% would put new buyers in a better position.

That’s as the 100-day moving average is crossing up through the 200-day moving average at $12.68; as short-term uptrend support comes into play near $13, and as the 50% retracement sits at $12.45.

Somewhere in that $12.50 to $12.75 range would be more ideal for buyers. That’s because traders will be able to stop-out on a move below $12.45 and keep their losses minimal. A close below this mark would thrust BBBY stock into no-man’s-land.

Should support in this area hold, the first upside target is the 61.8% retracement, then the post-earnings open and high, at $14.49 and $14.90, respectively.

Above that and Bed Bath & Beyond stock may begin to fill the gap, with the 78.6% retracement sitting at $15.51.

Given the quarter, though, I wouldn’t get overly bullish on the stock. Let’s keep our expectations reasonable. For now, let’s wait for a better risk/reward in BBBY stock.

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