Bed Bath & Beyond in the Zone

 | Feb 06, 2013 | 10:00 AM EST
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I haven't looked at Bed Bath & Beyond (BBBY) in a while, but when I did, I found something I liked. This trade setup started on the weekly chart with a price cluster of support showing at the $54.16 to $54.55 area. This zone includes a 0.382 retracement of one swing and a 0.786 retracement of another, along with a 1.272 extension of a prior swing up. These price relationships are overlapped by a very important 100% price projection of a prior swing down. Note the first swing down on the weekly chart into the June 2012 low was $17.07 in price. The second swing down illustrated on this same chart was very similar at $17.28. This "symmetry" (similarity of swings in the same direction) was an important component of the buy setup zone in this case. Sometimes major lows are made at these types of projections on the weekly charts. The recent low in this stock was at $54.33, directly within this key zone.


Bed Bath & Beyond (BBBY)
Source: Dynamic Trader


Sometimes I will provide trade setup zones in advance and have you look for a buy trigger to see if it is worth placing a bet against a particular zone. In this case, the zone has been tested and held. Since the upside potential is rather healthy, as long as price continues to hold above this key low, we are not late to the party. The upside potential of this pattern shows us that the $81.69 area is a possibility. Pay special attention to a healthy hurdle on the way up, however, at the $67.17 to $67.62 area, which is where I would be concerned about a possible failure if we get there. That is where I would protect profits a little more aggressively if I were long.  

The strategy is to consider the buy side in this stock with the maximum risk defined below the $54.33 swing low. Options strategies or outright purchases may be in order. If I can better refine a low risk entry in coming sessions, I will post it on the market updates section. Otherwise, you know what your risk is and your upside targets.

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