-- Bed Bath & Beyond stock is rallying despite a top- and bottom-line earnings miss. Does that make the stock a buy? Let's look. --
Shares of Bed Bath & Beyond (BBBY) were volatile this morning before the open on Thursday.
In premarket trading, the stock initially plunged after the company reported earnings.
At one point this morning, shares were down more than 10%. That follows yesterday's 10.8% loss.
But it didn't take long for the bulls to swing around and drive Bed Bath & Beyond higher by more than 20% at one point, both in the premarket and in the regular-hours session.
The rally may surprise some investors, given that the company reported a miss on both earnings and revenue expectations.
Particularly in a climate where many stocks are getting hammered amid the Fed's hawkish stance, many would not expect disappointing news to be overlooked.
But that's the case with Bed Bath & Beyond, which had ever-so-slightly violated its fourth-quarter low on Wednesday.
Let's look at the charts.
The first thing I see with Bed Bath & Beyond stock is the overall trend, which has been lower. That's true for both the short and the long-term.
Popping nicely off the $13.30 to $13.40 area, it's imperative that the stock finds some upside momentum from here.
Right now, it's contending with its short-term moving averages. However, if Bed Bath & Beyond stock can clear the 10-day and 21-day moving averages, it will have a clear shot at the 200-week and 50-day moving averages.
Above that and the December high is on the table at $20.12. A further rotation puts the $24 to $25 area in play.
In that zone, Bed Bath & Beyond will find prior resistance from last quarter, as well as the 200-day moving average.
On the downside, the key level to watch is $13.30.
If this mark is broken and not quickly reclaimed, the stock could be looking at more downside selling pressure even though it's down notably from the high.
Is Bed Bath & Beyond the worst stock to buy? No, not necessarily. Rallying on "bad" news is a good sign, in my opinion.
However, it's clearly not the type of quality stock we would like to hide out in if the markets begin to roll over. That is, unless it can maintain this recent burst of momentum. Keep an eye on that if more selling pressure ensues.