During last Friday's "Mad Money" program Jim Cramer laid out his game plan for this week. Tuesday is a huge earnings day, he told viewers. We'll hear from Best Buy (BBY) , American Eagle Outfitters (AEO) and The Gap Inc. (GPS) , all Cramer faves.
Let's check out the charts of BBY ahead of its third-quarter numbers.
In this daily bar chart of BBY, below, we can see the price action of the past tumultuous 12 months. Prices declined with the broad market to a March low and then we saw a quick and successful retest of the low in early April. BBY rallied smartly to late August. From the latter part of August the price action shifted to a rally and pullback phase that is ongoing. BBY made a new high earlier this month but the indicators are wobbly. The trading volume is relatively stable from August instead of rising.
The On-Balance-Volume (OBV) line has made a new high for the move up but it has lagged the price action. The 12-day price momentum study in the lower panel shows a bearish divergence as momentum has been weakening since August even though prices have been making higher highs. This pattern tells us that the rate of acceleration in prices has been slowing, which can foreshadow a price peak.
In this weekly bar chart of BBY, below, we can see a mixed picture. Prices are still in an uptrend and trading above the rising 40-week moving average line. The weekly OBV line shows a rise from March but the line is also flat in October and November so far. The 12-week momentum study shows that momentum has been weakening since August.
In this weekly Japanese candlestick chart of BBY, below, we can see upper shadows above $120, telling us that traders are rejecting the highs above that level.
In this daily Point and Figure chart of BBY, below, we can see the uptrend in price as we filter out smaller jiggles. Prices have overrun a target of $84. A trade at $110 or $108 may start to weaken the picture.
Bottom line strategy: I have no special knowledge of what the numbers for third quarter look like for BBY, but I can say the technical picture has been weakening ahead of the figures. A sideways to lower trading range may be what we encounter in the weeks ahead.
