NEW BEARISH Plays
Best Buy Co. - BBY - close: 23.97 change: -0.75
Stop Loss: 25.55
Current Gain/Loss: unopened
Entry on January -- at $--.--
Listed on January 29, 2014
Time Frame: Exit PRIOR to earnings on Feb. 27th
Average Daily Volume = 17.6 million
New Positions: Yes, see below
Why We Like It:
BBY is in the services sector. The company operates a chain of consumer electronic stores. The company was one of the market's best performing stocks in 2013 with a rally from $12 to almost $45 in November last year. The company was determined to combat the "show room" phenomenon that had plagued it in years past. What is show rooming? Consumers would walk into a Best Buy store, look at and play with the products they were interested in, and then go home and buy them online at a cheaper price, usually at Amazon.com.
Unfortunately Santa was not good to the major retailers this year. Overall foot traffic inside retail stores was down. Shares of BBY collapsed on January 16th after the company announced same-store sales of -0.9% in December and lowered its Q4 guidance. If you were bullish on BBY you could argue that a -$20 drop from its 2013 highs (-40%) should have already priced in this negative news. Yet BBY stock is not seeing much of a bounce. Instead the stock is slowly sinking to new lows and underperformed the market today with a -3.0% decline.
The path of least resistance is down. With the broader market looking vulnerable that's not going to help shares of BBY find any support. I was surprised to see that the most recent data only listed short interest at 7.9% of BBY's 282 million share float. I would have expected short interest to be higher. Then again shorts would have been crushed during BBY's rally in 2013.
We are suggesting small bearish positions at the opening bell tomorrow morning. Our target is $20.25.
Suggested Position: short BBY stock @ (the opening bell)
- (or for more adventurous traders, try this option) -
Buy the MAR $20 PUT (BBY1422o20) current ask $0.46