Consumer durables retailer Best Buy Co., Inc. (BBY) reports earnings before the opening bell on Wednesday, Feb. 27, with the stock in a slow recovery below a "death cross" that formed on its daily chart on Nov. 14. The weekly chart is positive after the stock ended 2018 with a "too cheap to ignore" stochastic reading. The stock also held its "reversion to the mean" at its Dec. 24 low.
Best Buy stock closed Monday, Feb. 25, at $60.55, up 14.3% so far in 2019 and in bull market territory at 26.9% above its Dec. 24 low of $47.72. The stock is also in bear market territory at 28.2% below its all-time intraday high of $84.37 set on Aug. 22.
Best Buy reports earnings with a favorable P/E ratio of 11.90 and a dividend yield of 2.98 according to Macrotrends. Analysts expect the retailer of appliances, TVs and accessories to post earnings per share of $2.57 when it reports results before the opening bell on Feb. 27. Analysts expect a positive trend in holiday foot traffic and increased sales given consumers' lower tax rate. The retailer should also show improved e-commerce sales as it better competes with Amazon.com, Inc. (AMZN).
The daily chart for Best Buy
Best Buy stock declined by 43% from its all-time intraday high of $84.37 set on Aug. 22 to its Dec. 24 low of $47.72. This bear market has been consolidated since the Dec. 24 low, but a "death cross" formed on Nov. 14, when the 50-day simple moving average fell below the 200-day simple moving average to indicate that lower prices would follow. This remains in play, with the 50-day and 200-day simple moving averages now at $56.68 and $69.41, respectively.
The stock closed Dec. 31 at $52.96, which resulted in the key levels from my proprietary analytics. My annual value level is $46.20, with my semiannual pivot at $60.19 and my quarterly risky level at $82.17. The close of $59.24 on Jan. 31 resulted in my monthly risky level at $68.35. My weekly risky level is $65.50.
The weekly chart for Best Buy
The weekly chart for Best Buy is positive, with the stock above its five-week modified moving average of $59.37 and is above the 200-week simple moving average, or "reversion to the mean," at $50.24, last tested during the week of Dec. 28, when the average was $49.30. The 12 x 3 x 3 weekly slow stochastic reading is projected to rise to 57.73 this week, up from 49.93 on Feb. 22.
Trading Strategy: Buy shares of Best Buy on weakness to the 200-week simple moving average and my annual value level at $50.24 and $46.20, respectively, and reduce holdings on strength to my weekly and monthly risky levels at $65.50 and $68.35, respectively. My semiannual pivot is at $60.19.
Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.