No Longer a Beauty: It's Time to Ditch Ulta

For more than a month, stocks have been trading sideways as traders waited for some clarity from Fed Chair Janet Yellen in her much anticipated speech at Jackson Hole, Wyo. I was actually hoping that Yellen's speech would be enough to push the S&P 500 out of its trading range. Up or down? Honestly, it didn't make much difference to me, although I always prefer that stocks move higher because I like it when everyone's happy. When stocks are falling, few folks are happy (other than the perma-bears who finally get a chance to revel in the agony of the bulls). I would rather hear Bobby McFerrin sing Don't Worry, Be Happy than Stevie Ray Vaughan sing The Sky is Crying. Wouldn't you? But before the first hour of trading was over Friday, any shot at clarity became muddied. Yellen hinted that the Fed might have new tools to fight inflation. She also basically said that the Fed has the tools to fight the next recession (which made me feel a lot better about things). Stocks rallied. Just a few minutes later, Fed Vice Chair Stanley Fischer was on CNBC and essentially said, Don't buy that crap. Stocks are expensive, and we're probably gonna hike rates next month if things look good. So where are we now? We're waiting on the unemployment report this Friday. If it is positive, the Fed will hike in September...or not. If it's negative, the Fed will stand pat in September...or not. At some point everybody will figure out that the Fed is totally winging it. Until that time, however, we'll continue to look for clarity from the Fed. Good luck with that. Now, let's get back to trading. Ulta Salon, Cosmetics & Fragrance has been flying so high for so long that it's tough to envision it finding a place to land. But after a solid earnings report led to selling rather than buying, I think it's time to ditch ULTA. This weekly chart, above, shows just part of the uptrend shareholders have enjoyed. I've circled two volume bars that represent extreme selling pressure. But there is a big difference between the two. The high volume selloff last year occurred very close to the 40-week (200-day) moving average. You can see that the stock ultimately recovered. But last week's selloff occurred from an extended level -- far above the 40-week moving average. There's still time to sell. Do it. Amazon -- a holding in TheStreet's Growth Seeker portfolio -- has been biding its time for a while, churning between $750 and $775 for the past few weeks. But this sideways consolidation has been a healthy thing for the market leader. I've circled the narrow range in the daily chart, and I think it's just a matter of time before AMZN breaks out above $775 and starts the next move higher. As long as the stock stays above the 50-day moving average, AMZN is one you want to hold. Twilio is a recent IPO that nearly tripled in price before pulling back. The daily chart, above, shows a volatility squeeze that preceded the breakout that tested $70. That three-day breakout has been followed by about a week and a half of consolidation. On Friday, the stock finally tested the 20-day moving average (the middle Bollinger Band) and moved higher on a day when many stocks were down. I believe this pullback has run its course and it's a good time to be buying. If you keep a stop below $50, you've got a defined risk on a high-reward stock. Back in 2008, Edwards Lifesciences was trading at around $11. So it's run up about 1,000% since then. While the stock is a bit extended above the 200-day moving average, the 50-day moving average is trending higher and provides a pretty good reference for a stop loss. The stock is trading in a box pattern, much like it was back in March. I would be a buyer now, and keep a stop just below the 50-day moving average. That gives the stock some room to move, but still keeps losses contained and well-defined.

No Longer a Beauty: It's Time to Ditch Ulta

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