For his second "Executive Decision" segment of Mad Money Wednesday night, Jim Cramer spoke with Tarang Amin, chairman and CEO of e.l.f. Beauty (ELF) , the cosmetics maker that just posted an earnings miss, but raised its forecasts.
Amin explained that ELF has been investing for long-term sales growth and the earnings shortfall reflects that investment.
That extra spending doesn't mean ELF isn't committed to retail however. Amin said that Ulta Beauty (ULTA) remains an excellent national partner and sales continue to do extremely well. Walmart (WMT) and Target (TGT) are also strong partners. Amin was also bullish on their partnership with singer Alicia Keys.
Let's check out the charts and indicators.
In this daily bar chart of ELF, below, we can see that prices have retreated from their late December/early January high. ELF closed below the cresting 50-day moving average line and looks like it will fail at a retest of the line. The 200-day moving average line intersects around $19.50 - not far away.
The On-Balance-Volume (OBV) line turned sharply lower in January showing us of a rapid shift from aggressive buying to aggressive selling. The Moving Average Convergence Divergence (MACD) oscillator has slipped below the zero line this month for an outright sell signal.
In this weekly bar chart of ELF, below, we can see that some weakness has begun. Prices are pulling back towards the rising 40-week moving average line.
The weekly OBV line shows a peak in late December as traders became aggressive sellers. The MACD oscillator has crossed to a take profit sell signal in this longer time frame.
In this daily Point and Figure chart of ELF, below, we can see a potential downside price target in the $19 area.
In this weekly Point and Figure chart of ELF, below, we can see a potential longer-term price target in the $35 area. I do not know if this target will still exist if prices decline to $19 first. We'll have to see.
Bottom line strategy: We had a positive view of ELF back on September 23. ELF rallied but changed direction at the beginning of the year. Traders should stand aside of ELF and let this correction play out. A decline to $19 is not a problem but the bigger risk is a break of the support around $18. (In full disclosure, I have been a fan of Alicia Keys from when she opened for the late Al Jarreau.)