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Why Best Buy Is A Classic 'Headline Risk'

Mark Meadows

Serge Berger is a weekly guest on #PreMarket Prep, a daily trading idea radio show hosted by Joel Elconin and Dennis Dick.

Head trader and investment strategist at The Steady Trader, Serge Berger, said on Benzinga's #PreMarket Prep that Best Buy Co Inc (NYSE: BBY) is a "classic headline risk stock." If you look at the chart, Berger said, you can quickly see the amount of up and down gaps. Berger said that traders put "a lot of weight" on the sales figures, which "makes sense."

With Best Buy, Berger said he would stay away from the name heading into Thursday. Berger, who doesn't typically play options into earnings, said that he expects there to be more opportunity and higher-probability setups following earnings. For Best Buy, he noted, he would look to enter a trade that would capitalize on the price filling any earnings gap.

Related Link: Big-Box Retailers Step Into The Spotlight For Earnings This Week

In general, Berger said the retail story has "changed" over the past month and that consumer discretionary names have "really turned" in a negative direction. He expects retail to "continue to underperform" unless the U.S. dollar resumes its climb.

Year-to-date, Best Buy has declined 10.75 percent after falling 3 percent in 2014. The stock, which showed year-to-date gains during retail's strong March, quickly fell back to lows over the past month.

According to Estimize, traders are looking for EPS of $0.31 on $8.576 billion in revenues. That is slightly above the Street's $0.29 and $8.553 billion estimates.

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