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This beaten-up stock may be ripe for a turnaround

Bed Bath & Beyond? These days, it's more like Bed Bath & Beyond painful for its investors.

Shares in the home furnishings company dropped 7.4 percent on Thursday after it reported its profits fell 7.6 percent. On top of that, Bed Bath & Beyond lowered its guidance for the second quarter.

It's been a painful year for Bed Bath & Beyondshareholders. The stock is the fourth-worst performing company in the entire S&P 500, down 29.6 percent since the start of 2014.

However, Richard Ross, global technical strategist at Auerbach Grayson, thinks this may be a buying opportunity for the stock based on the charts.

(Watch: Bed Bath and Beyond Q1 slightly negative)

"This is a chart that only a technician could love," said Ross, a "Talking Numbers" contributor. "I'm actually warming up to the stock down here on the heels of a 30percent decline thus far this year."

After last year's gains of well over 50 percent, the stock looked promising as it touched the $80 level at the start of the year. But, after word of disappointing holiday sales, the stock dropped to the $60-range within a matter of days.

Ross sees three gaps in the stock that he believes signals a turnaround is ahead for Bed Bath & Beyond shares. Gaps are formed when the highest high price of one day is below the lowest low of the following day or vice versa.

The first gap according to Ross' chart is a "breakaway gap," which shows a change in the uptrend in early January. The second gap, a "runaway gap" occurred in early April as the stock broke lower. "That just tells us that the pattern or the trend to the downside is continuing," Ross said.

The last gap, which happened Thursday on the latest earnings miss, is an "exhaustion gap." "That's when investors essentially give up, fear has peaked, but that's often where bottoms are made," explained Ross. "I like the way it establishes itself right at that critical support around $55, and you see that key intra-day reversal today."

(Watch: Worry for BBBY on Wall Street)

Ross cautions that long-term chart is "a little bit of a hot mess," saying "We've taking out an uptrend that's been in place since 2008 [and] we've also broken below the 200-week moving average for the first time since 2009. Clearly that's not good, but I do like enough of what I see in the short-term chart to be a trading buyer of the stock down here."

Erin Gibbs, equity chief investment officer at S&P Capital IQ, also believes Bed Bath & Beyond could be in the process of turning itself around. Gibbs notes her company owns it in some of their portfolios.

"I still think that there's potential for this stock," Gibbs said. "This is the same story that we hear over and over again with brick-and-mortar retail companies is that price competition is fierce. Bed Bath & Beyond is really struggling to adjust to this new environment."

Gibbs attributes last quarter's disappointment to too many sales and too many coupons. "But they're really in transition," she said. "They've been able to change their assortment to lower margin assortments. They understand this new world. We feel that they are really well positioned to out-market and really gain market share in this new environment."

Gibbs sees great value in the stock now that lower prices have sent it to around 11 times forward expected earnings. "There really is potential to turn around," she added. "They've also been buying back shares which help the earnings story. So, the disappointment this quarter has been a lot less in the past two and I think this is really the turning point."

To watch the full discussion on Bed Bath & Beyond, with Ross on the technicals and Gibbs on the fundamentals, watch the above video from CNBC's "Street Signs."

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