Bed Bath & Beyond Inc. (NASDAQ: BBBY)

Bed Bath & Beyond Inc., together with its subsidiaries, operates a chain of retail stores. It sells a range of domestic merchandise, such as bed linens and related items, bath items, and kitchen textiles; and home furnishings, including kitchen and tabletop items, fine tabletop, basic housewares, general home furnishings, consumables, and certain juvenile products. The company also offers giftware, household products, and health and beauty care items; and infant and toddler merchandise. Bed Bath & Beyond Inc. operates stores under the names of Bed Bath & Beyond (BBB), Christmas Tree Shops (CTS), Harmon and Harmon Face Values (Harmon), and buybuy BABY. In addition, it distributes textile products, amenities, and other goods to customers in the hospitality, cruise line, food service, healthcare, and other industries. As of November 24, 2012, the company had 1,466 stores, including 1,003 Bed Bath & Beyond stores; 264 stores under the names of World Market, Cost Plus World Market, or World Market Stores; 74 stores under the names of Christmas Tree Shops or andThat!; 78 buybuy BABY stores; and 47 stores under the names of Harmon or Harmon Face Values in 50 states, the District of Columbia, Puerto Rico, and Canada. Bed Bath & Beyond Inc. was founded in 1971 and is headquartered in Union, New Jersey.

To review Bed’s stock, please take a look at the 1-year chart of BBBY (Bed Bath & Beyond, Inc.) below with my added notations:

1-year chart of BBBY (Bed Bath & Beyond, Inc.)

BBBY has had a rough go of it since peaking in June. However, over the last (3) months the stock has been consolidating within a small, rectangle pattern. Rectangle patterns form when a stock gets stuck bouncing between a horizontal support and resistance. A minimum of (2) successful tests of the support and (2) successful tests of the resistance will give you the pattern. For BBBY, the rectangle pattern has formed a $60 resistance level (red), which was also a prior support, and a $55 support level (blue).

The Tale of the Tape: BBBY has formed a rectangle pattern. The possible long positions on BBBY would be either on a pullback to $55, or on a breakout above $60. The ideal short opportunity would be on a break below $65 or at $70.

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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!

Good luck!

Christian Tharp, CMT