Best Buy Co. Inc. (BBY) has doubled in the past 12 months, but rapidly changing views of the future of retail stores and how we shop have recently weakened the chart and indicators. Maybe the Geek Squad has met its match?
Let's not get too bearish in the remaining Prime hours before we look at the charts and indicators below.
In this daily bar chart of BBY, above, we can see a number of gaps to the upside since August. In a sharp change of direction, BBY gaped to the downside yesterday. With the gap to the upside in late May and the gap lower Monday, some chartists will suggest that the price action the past five weeks has been an island reversal.
Maybe. I would be more convinced if the volume of trading was heavier yesterday. Our favorite indicators tell a bearish story, as BBY closed below the rising 50-day moving average line yesterday.
The daily On-Balance-Volume (OBV) line peaked in late May and is still pointed lower, as sellers of BBY have behaved more aggressively. The trend-following Moving Average Convergence Divergence (MACD) oscillator is pointed down towards the zero line in a bearish mode.
In this weekly bar chart of BBY, above, we can see that prices are still above the rising 40-week moving average line. There is some support around $50 and more around $45.
The weekly OBV line bottomed last June, but it may have peaked at the end of May. The weekly MACD oscillator has narrowed towards a bearish crossover and soon a "take profits" sell signal.
In this Point and Figure chart of BBY, above, we can see the recent decline to $54. Point and Figure charts are different from bar charts, as they filter out the small jiggles, ignore gaps and volume. The short-term breakdown on this chart opens the way for a possible decline to $49. A deeper decline could happen as the support in the $45-$42 area could be retested.
Bottom line: The daily chart of BBY does not show significant selling before yesterday's gap, so BBY could bounce in the very near-term, but with everyone changing their view of retailing I would not rule out further declines and a test of support.