Trendline Could Keep Pressure on Bed Bath & Beyond Shares

BBBY has historically struggled near its 80-day moving average

by Josh Selway

Published on Sep 14, 2018 at 11:16 AM

The shares of retailer Bed Bath & Beyond Inc. (NASDAQ:BBBY) have struggled over the past year, giving back 38%. Just yesterday the stock was actually one of the worst performers on the Nasdaq, as it fell almost 7%. These struggles could persist, too, based on technical data from Schaeffer's Senior Quantitative Analyst Rocky White.

Looking closer, White points out that BBBY stock has historically struggled when it nears its 80-day moving average. If you go back to 2008, there have been 10 other occasions where the shares have moved within one standard deviation of this trendline following a lengthy stretch below it. Following these "signals," the stock has went on to average a one-month loss of 6%, and has moved higher during those time frames just three times.

With Bed Bath & Beyond last seen trading at $17.82, another loss of this magnitude would place it near $16.76. Of course, it's possible much of this downside already occurred in yesterday's session.

bbby stock chart

To be sure, most of Wall Street is already avoiding the struggling retailer, with not one of the 15 covering analysts handing out a "buy" endorsement, compared to five "strong sell" ratings. What's more, short interest accounts for a whopping 22.6% of BBBY's float, or two weeks' worth buying power, based on average daily volumes.

For what it's worth, it would seem these short sellers have been using call options as a hedge. That's because the security's 50-day call/put volume ratio across the
 International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is at an elevated 5.19, ranking just 1 percentage point from an annual high.

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