One of the surprises, at least on the surface, of the market’s recent swoon was the outperformance of consumer discretionary stocks. This group usually leads to the downside, not the upside, when the market is weak. Consumer staples stocks, on the other hand, usually do relatively well in times of turbulence. So when both of these groups outperform, there has to be something else in play.

Although I am not an economist, it appears that consumers are going to be beneficiaries of prolonged lower energy prices.

On the charts, one stock with solid potential is retailer Bed, Bath & Beyond (NASDAQ: BBBY). 

It began this year on a very sour note, but managed to turn itself around in June. From there, the trend has been quite bullish, and there is still more room to run.

As we can see on the chart, BBBY gapped down in January. After a failed recovery attempt in February and March, it gapped down again.

#-ad_banner-#On June 26, it experienced the final washout as it gapped down for a third time on exceptionally heavy volume, only to close near that day’s high. On a candlestick chart (not shown), the day’s action would be labeled a “bullish hammer,” which signifies that the market was “hammering out a bottom.” 

In simpler terms, something happened intraday to make the stock look very cheap and buyers rushed in. The actual news is of no importance as we look at it now, six months later.

Last month, BBBY reached resistance set by the bottom of the January gap and top of the March rebound at roughly $71. Shares paused, and then rallied through that resistance level in a breakout move. After pulling back in a “flag” pattern, so named for its appearance of a flag flying on a flagpole, they bounced off the $71 level to create a second breakout. 

All of this is a fancy way to say the stock broke out, endured some profit-taking, and then took off again. It is a rather bullish signal. 

BBBY is currently trading inside the large January gap, so it is likely to encounter little resistance until it reaches the top of that gap near $79, in round numbers.

I like the fact that the stock is already in rally mode and has support from its sector. Wall Street wisdom urges investors to look for the strongest stocks in the strongest sectors, and BBBY sports a solid rising trend. 

Recommended Trade Setup:

— Buy BBBY at the market price
— Set stop-loss at $70.25
— Set initial price target at $79 for a potential 7% gain in three weeks

Note: Over the past year, one little-known indicator spotted 29 stocks right before they jumped double digits in a month. Now, it’s tagged another stock as an immediate “buy.” In fact, it’s flashing the same kind of buy signal as a stock that rose 266% in a year. Get its name here, including all the details on this indicator.

This article originally appeared on ProfitableTrading.com: Chart Says This Retailer’s Comeback Isn’t Finished​