Expect a Trading Range for Ulta Beauty

 | Jul 14, 2017 | 12:17 PM EDT
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Ulta Beauty (ULTA) has been a strong upside performer since 2009, but we try to be forward looking when it comes to chart analysis.

With prices now below the 50-day and 200-day moving average lines, we have to pay closer attention to the clues the charts may be revealing. Let's check.

In this daily bar chart of ULTA, below, we can see how the touching/testing of the rising 50-day moving average line from December through May was a buying opportunity. This pattern changed in June, as prices closed below the average line and then broke the May lows. ULTA has continued lower in July, breaking the still-rising 200-day moving average line.

Before ULTA broke its 50-day line, the On-Balance-Volume (OBV) line turned lower -- signaling more-aggressive selling. In the lower panel is the 12-day momentum study, which is not showing a bullish divergence to the price action.

In this weekly bar chart of ULTA, above, we see that prices have broken below the rising 40-week moving average line. Is this break different from the one in early 2016? Yes. This time around, the weekly OBV line has been weak for about six weeks and the MACD oscillator shows a bearish divergence and a fresh take-profits sell signal.

Bottom line: Without a bullish divergence from the momentum study or strong volume on "up days," I am not attracted to the long side of ULTA. I would look for a $280 to $240 range in the next few weeks.

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