Skip to main content

Be Patient With Best Buy

This play is taking its time to marinate, but the stock is still a buy at these key levels.
  • Author:
  • Publish date:
Comments

I find it quite interesting to review some of my research days or weeks after it was originally published, when many of my technical indicators advise me to examine a chart, but not necessarily to trade the stock yet. So let's look back at my Best Buy (BBY) piece from late last month.

In short, the story is far from over, and there's still plenty of time to be involved in this name.

Here's what I said on Feb. 28:

"On Jan. 16, Best Buy traded down 28% to close at $26.83. That selloff generated a long-term oversold condition, but not an oversold signal as there was no upside momentum.

"Best Buy continued to trade lower and failed to close above the $26.83 level ever since Jan. 16 (27 trading days).

"Yesterday it looked like things might be ready to change as the stock rallied more than 8% intraday. With the Jan. 16 high at $28.20 and close at $26.83, these were the levels to watch.

"Best Buy ran right to $28.20 and then reversed hard. We watched if Best Buy could close above $26.83, but that also failed to happen yesterday.

"All is not lost yet, as the short-term buying zone is at $25.18 to $24.46. I would look to be a small buyer in this zone. Please set alarms for a close above $26.83 to also buy some and then finally a close above $28.20 to add to longs."

Let's review what happened since then, and where is the stock going from here.

As mentioned above, a long-term oversold signal triggered on Feb. 6. More recently, on March 6, Best Buy traded inside the buying zone for one day. This is why we advise on the appropriate purchase levels ahead of time.

I am still waiting for a close above $26.83, and it has now been 40 days since the stock first generated a long-term oversold condition. Maybe I should have called Noah.

So, at this point, the buying zone is between $25.17 and $24.46. Add to longs should the stock close above $26.83, and add more on a finish past $28.20.

The upside target remains $30.74.

As for our exit plan -- which is always necessary -- if Best Buy closes below the $24.46 level, we'll need to take off the trade.

As you can see, this not your typical short-term play. Sometimes, though, slow and steady will win the race.

At the time of publication, Berman had no positions in the stocks mentioned.