BBY Best Buy - A Ripe Opportunity for 50%Best Buy is a company that I never liked. However, recently I had to deal with them and found that the stores are in much nicer shape, the inventory is much better, the web experience is actually pretty clean, and moreover, at least here in Canada, there's actually nowhere else to buy electronics. They pretty much have the market cornered.
What I found is that while prices were low because consumer spending is in the toilet, inventory is also low because China has been smashed up pretty hard by the Wuhan Pneumonia pandemic, and the situation with Xi and his Chinese Communist Party is likely to get a lot worse before it even begins to try to get better.
You have to be careful with equity longs over the next 4 months, especially the more bullish it gets, because the Chinese Communist Party's collapse is the big black swan that nobody believes is coming, but that the US and Wall Street seem to know is on the way.
When the calamity unfolds, a lot of things are going to change in the world. No human beings are really prepared for what is going to happen. Humans and governments always make their plans, but reality always gets the last laugh.
What this ultimately means is that for the electronics sector, demand should increase because we're heading into the spring and summer months of the North American markets, but supply will be low because the guys who were making things have been disrupted, and in the worst way.
In other words, we're looking at a bullish impulse inside of prevailing bearish conditions, which is the premium short setup. But often the best short setups are precluded by outstandingly easy long setups, which is where we're at with Best Buy.
I currently believe that since the prevailing narrative across all markets has been so bearish for so long, that we're about to get a bear trap that will see equities and indexes dump rather aggressively, because everything is about to go off hard to the upside.
I believe that the real market crash will begin to unfold somewhere around the end of July of this year, and in the meantime, markets are going to pump while Wall Street gets positioned on the real "Big Short."
So for Best Buy, there are some nuances to the chart that's been setup.
One is that on the monthly bars, the price action can only be described as unclear.
COVID and October lows have never breached or even touched the long term trendline, and yet there's an unbroken double bottom at $49. While double bottoms normally give me a big reason to believe they're about to become a magnet, I think that going from $86 to $45 in the next few months is just really not the most likely option.
On the weekly bars, we get a much more lucid situation:
Weekly, Best Buy is still trading well below equilibrium of the range measured from the ATH to the October low, and under the 200 DMA. None of these are bullish factors, but we also want to buy weakness when going long.
In terms of upside targets, Best Buy has an enormous gap over $116 that was never touched on the way down. Instead, the MM algo left a spike candle at $112 and proceeded to dumpster it.
Both of these areas become targets to aim for on a long trade.
On the daily candles, recent price action was clearly a breakout play against the 200 DMA, with the recent FOMC rate pump activity being a re-raid on the August of '22 highs.
This means I expect a pullback near the lows, primarily because price algorithms like to return towards lows after taking big highs during news drivers. But I feel it's also very obvious on Best Buy because there's a nice fat gap under the equilibrium between October lows, the recent highs, and the daily 200 DMA.
Upside from the $75 area to the $115 gap is 50% and the time horizon is roughly 3 months. Stop out if it sets a new low.
Good luck, and don't get caught being afraid on coming price action. Even more importantly, don't get caught being greedy if markets start to pump.
Humanity will soon face an enormous tribulation that will be hard to pass. More will be at stake than trading accounts.
