Is e.l.f. Beauty More Attractive Yet?

 | Aug 10, 2017 | 2:47 PM EDT
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We talked about e.l.f. Beauty (ELF) on Real Money about two months ago, and we gave upside and downside parameters: "It will take a rally above $29 to get me excited about the long side and a close below $24 will keep me on the defensive." With hindsight, we can see that ELF has not been able to rally above $29, and today it broke below $24.

I don't know if ELF will close today below $24, but the trend for this stock is still bearish. We still don't have much price history to work with, but let's review what we have and play strategist about what might come next.

In this daily bar chart of ELF, above, we can see a pattern of lower highs since December, and with today's new low we now have lower lows. Prices are below the flat 50-day moving average line and below the 200-day moving average line (limited data). The daily On-Balance-Volume (OBV) line has been in a clear decline from mid-May and tells me that sellers of ELF have been more aggressive.

There is a bullish divergence between the momentum study in the bottom panel and the price action from late May to July, but it hasn't resulted in a turnaround for this new issue.

This Point and Figure chart of ELF, above, doesn't have a lot of history but it does show a distribution pattern with a new low at $23.80 and a potential price target of $20.40.

Bottom line: Look for continued price weakness in ELF with $27 probably capping the upside and maybe $20 on the downside.

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