Don't buy into Best Buy's chart: Technician

Best Buy's stock took a drubbing on disappointing earnings results Tuesday. It was the latest setback in what has been a brutal year for the electronic big box retailer. But one portfolio manager thinks there are positive signs of a turnaround already in progress.

"They are very much in the midst of a turnaround story," Erin Gibbs, who as equity chief investment officer for Standard & Poor's Investment Advisory Service, manages $12 in assets. "They know they have to shift their revenues from brick-and-mortar to online, and that's what they've been doing.

Part of that shift means cost-cutting, according to Gibbs. She cites Best Buy's 11 percent cut in expenses as proof this is happening. "Margins have been greatly able to expand while revenues are still staying relatively flat," she said. "We're seeing great traction in the online business with about a 22 percent [sales] increase. So if they can keep this up, there is hope that they can really adjust to this new economy of the retail consumer and see the growth come back."

However, Todd Gordon, founder of, is unconvinced that Best Buy's turnaround plan is working, at least as far as the stock's technicals are concerned.

"Unfortunately, Best Buy has got to prove something to us first before we can get behind the fundamental story," said Gordon, a CNBC contributor. He points out that Best Buy's stock "gapped down" in January after reporting bad holiday sales. A "gap down" happens when the stock's highest price one day is still far below the lowest price of the previous day, creating a gap in the charts. Technicians believe stocks eventually "fill the gap" by trading back up in the area missed by the gap. However, Best Buyhas been unable to do so or even break above $33.25 per share.

"We've only managed to have covered just about half of that gap," Gordon said. The stock may in an upward-sloping trend channel since January but it formed a bearish double top at the $33.25 level. The stock closed at $29.80 per share on Tuesday.

"Stay away," Gordon recommends. "If it wants to get above that and go up and close the gap from January, fine. Until that, I would stay away."

To see the full discussion on Best Buy, with Gibbs on the fundamentals and Gordon on the technicals, watch the "Street Signs" video above.

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