Bed Bath & Beyond Needs to Form a New Base Pattern

The shares have traveled a long way from the white-knuckle low of early April.

In his first "Executive Decision" segment of Mad Money Wednesday evening, Jim Cramer spoke with Mark Tritton, president and CEO of Bed Bath & Beyond (BBBY) , the retailer that is working on turning around its operations.

Tritton said Bed Bath & Beyond is forging ahead with its strategy to provide everyday value with an omni-channel, but digital-first strategy. 

When asked about the balance sheet, Tritton said with $2 billion in cash on hand, Bed Bath & Beyond will be investing in four key areas: technology, supply chain, stores and product assortment.  Tritton was bullish on the Bye Bye Baby franchise, saying that sales and registry items continue to be strong and baby items are a huge opportunity for the company.

We looked at BBBY on October 2 and recommended, "Even though we can come up with a more bullish Point and Figure target of $43 I would still recommend to traders who may be long BBBY to take some money off the table in the $23 area. After a period of sideways consolidation I might suggest repurchasing BBBY but we are not there yet." BBBY rallied to $26 this month before reacting lower. 

Let's check out some new charts. 

In the daily bar chart of BBBY, below, we can see that prices gapped to the downside Wednesday. Trading volume was not particularly heavy so traders did not seem "running for the doors."

The On-Balance-Volume (OBV) line turned lower indicating that sellers were becoming more aggressive. The Moving Average Convergence Divergence (MACD) oscillator has crossed to the downside for a take profits sell signal. 

 

In the weekly bar chart of BBBY, below, we can see a dramatic improvement in the chart over the past six weeks or so. Prices have broken a longer-term downtrend and the slope of the 40-week moving average line has turned positive.

 

The weekly OBV line has scored a new high for the move up from the March low but the MACD oscillator has narrowed telling us that the strength of the uptrend is weakening. 

 

 

 

In this daily Point and Figure chart of BBBY, below, we can see that prices reached and exceeded a downside price target. Prices could see further weakness as renewed buying interest (a.k.a. support) has not materialized just yet. 

 

In this weekly Point and Figure chart of BBBY, below, we used close-only data and a traditional even-dollar scaling. Here the chart suggests a possible upside price target in the $57 area. 

 

 

 

Bottom-line strategy: The shares have traveled a long way from the white-knuckle low of early April. Prices need to regroup and establish a new higher-level base to eventually launch another uptrend. Be patient and wait for a new base to form.

 

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