As a follow up to yesterday’s article on VRUS, there are still stocks in this market that are maintaining current trends higher. Some are actually at or hitting new 52-week highs. When it comes to trading a stock hitting a 52-week high, I prefer stocks hitting a “NEW” high. To me, this would be a stock that hasn’t hit a new 52-week high in quite some time, or at least has a key area of resistance to break through. One such stock that may fit that description would be that of Bed, Bath & Beyond, Inc.
Bed Bath & Beyond Inc., along with its subsidiaries, is a chain of retail stores, operating under the names Bed Bath & Beyond, Christmas Tree Shops, Harmon and Harmon Face Values and buybuy BABY. In addition, the company is a partner in a joint venture, which operates two stores in the Mexico City market under the name Home & More. The company sells an assortment of domestic merchandise and home furnishings, which include food, giftware, health and beauty care items, and infant and toddler merchandise.
To review Bed, Bath & Beyond’s stock, please take a look at the 1-year chart of BBBY (Bed, Bath & Beyond, Inc) below with my added notations:
BBBY has been rallying higher over the last 2 months (green) and has run into a repeated $60 resistance (red) over the last 3 months. That $60 resistance meets my definition of a clear resistance level that would signify an important 52-week high breakout if BBBY could manage to break above it. If BBBY can break through that $60 level, the stock should be heading higher, most likely on a new uptrend.
The Tale of the Tape: BBBY has a clear resistance at $60 that would be a “NEW’ 52-week high breakout if it were to occur. A long position with a stop below $60 would be advised in that situation. Also, BBBY has reacted to $58 (blue) several times over the last 5 months. If BBBY were to pull back to $58 first, before a potential break above $60, a trader might enter a partial long position at that level as well.
Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.
No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!
Christian Tharp, CMT