Beyond Bed And Bath

  • October 18, 2001
  • Eddie Kwong

Sometimes you
find a stock that exhibits “good behavior.” What I mean is that you
notice the stock’s price action is reacting in an orderly, almost predictable
fashion to conventional tools such as moving averages, trading-range patterns,
and Fibonacci retracements. That doesn’t make trading any easier, of course.
And there’s always that possibility that just when you’re trained to believe
that you know the personality of the stock, well…the rug is pulled from
under you.

So as you
consider the price action in Bed Bath and Beyond
(
BBBY |
Quote |
Chart |
News |
PowerRating), keep in mind that:

  • …just because
    it is pulling back to the 50% retracement level, a level from which it bounced a
    good 3 points a week ago (we showed you that setup before it broke) and…

  • …just because
    the price action is getting congested between BBBY’s 50-day moving average (in
    blue) and the 50% retracement level, which suggests a breakout from that
    congestion could happen in the next few days…

…you cannot jump to conclusions. 

In this case, you’ve got wait until the setup
gets close to fruition. Keep your eye on multiple bouncing balls — the price action of the stock
itself, the retail sector, and the overall market — not to mention news.

Be patient. Ambiguity
has a tendency to gave way to clarity for very short-lived periods of
time. 

Eddie