Best Buy Co., Inc. (BBY) shares are stuck in the mud a few points under decade-long resistance near $60 ahead of third quarter earnings, scheduled for Thursday's pre-market. Current technical positioning is nearly identical to late August, when shareholders sold the stock aggressively despite the company beating estimates and raising guidance. The stock sold off once again in mid-September after Best Buy issued disappointing longer-term metrics at an Investor Day event.

Even so, the big-box retailer has held a 12-point range near resistance for more than five months now, correcting bearish impulses through time rather than price. This resilience balances the odds, raising hopes that the stock can clear the formidable barrier and head toward the $70s and beyond. However, outstanding third quarter results will be needed to keep sellers at bay and deliver the long-awaited breakout. (See also: Best Buy Kicks Off the Holiday Season Early.)

BBY Long-Term Chart (1990 – 2017)

The stock ended a long-term decline at a split-adjusted 17 cents in 1990 and entered a trend advance that continued into the November 1994 high at $5.03. Sellers took control into the first quarter of 1997, when Best Buy posted a higher low at 88 cents and bounced into a vertical uptrend, driven by the dotcom bubble. The stock added points at a rapid clip into the new millennium, topping out at $39.50 in April 2000 and selling off in a bear market impulse that hit a two-year low at $9.33 at year end.

Price action held within the 2000 trading range until a 2005 breakout booked impressive gains into the 2006 high at $59.50. That level is important to keep in mind because it is still being tested more than 11 years later. The stock drifted lower into 2008 and plunged with world markets during the economic collapse, coming to rest at a five-year low in the mid-teens. A bounce into the new decade stalled at the .786 Fibonacci bear market retracement, while a secondary decline into 2012 did more damage than the 2008 rout, dumping the stock to a 12-year low.

Best Buy stock emerged from the abyss in 2013, carving a vertical recovery wave that stalled at 2010 resistance at the end of 2013. A triangular consolidation contained price action into a December 2016 breakout, ahead or a rally wave that finally reached 2006 resistance in June 2017. The stock has ground sideways in a relatively narrow trading range since that time, absorbing bearish shocks rather than breaking down in a new sell swing.

The monthly stochastics oscillator entered a long-term sell cycle in July 2017, predicting at least six to nine months of relative weakness. Resilience despite this bearish signal has generated a bullish divergence, but it is unwise to read too much into short-term price action when a long-term signal is in place. As a result, skepticism into this week's earnings report is warranted, with informed market players hitting the sidelines ahead of the news. (For more, see: Is Best Buy Amazon-Proof?)

BBY Short-Term Chart (2016 – 2017)

The stock rallied out of the three-year triangle pattern at the end of 2016, establishing support near $40 that should generate a low-risk buying opportunity on a deep pullback. Price action since June 2016 has held the black rising lows trendline with current support just below $54.50. As a result, it will take little selling pressure after the news to trigger a breakdown that sets off a variety of sell signals. However, the 200-day exponential moving average (EMA) and range support near $53 may offer more useful predictive data, with a breakdown through that level likely to generate a substantial decline.

On the flip side, bulls need to fill the Aug. 29 gap between $58.75 and $61.50 to improve the technical tone and generate the buying power needed for a long-term breakout. That could happen within minutes if the earnings report surprises to the upside but will more likely require a positive feedback loop lasting several weeks at a minimum. The most frustrating outcome will unfold if volatility fails to spike and the price remains stuck within the multi-month trading range. (See also: Best Buy, GameStop Expect Apple-Related Traffic.)

The Bottom Line

Best Buy has been hovering at 2006 resistance for more than five months, with neither bulls nor bears gaining a major advantage. This balancing act makes it hard for traders and market timers to generate a much-needed edge, suggesting that the sidelines will offer the most advantageous positioning into the Nov. 16 earnings report. (For additional reading, check out: Best Buy Expands Same-Day Delivery, Eyeing Amazon.)

<Disclosure: The author held no positions in the aforementioned securities at the time of publication. >

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