Beauty products firm Estee Lauder (EL) is rallying Friday but I am not confident that the selloff is over just yet. Let's check and see if there is a "foundation" for a rally.
In this daily bar chart of EL, below, I can see that prices have tumbled lower since early February and lost nearly half of their "value". EL trades below the declining 50-day moving average line and below the bearish 200-day line.
The daily On-Balance-Volume (OBV) line has been weak since January and tells me that sellers of EL have been more aggressive than buyers. The Moving Average Convergence Divergence (MACD) oscillator is still below the zero line but shows improvement from May to August.
In this weekly Japanese candlestick chart of EL, below, I can see that prices have been in a downward trend much longer than the daily chart (above) shows. EL trades below the negatively sloped 40-week moving average line.
The weekly OBV line shows weakness. The MACD oscillator is in a bearish alignment below the zero line. I can see two small lower shadows below $150 but I doubt that is enough to convince buyers.
In this daily Point and Figure chart of EL, below, I can see a downside price target in the $147 area.
In this weekly Point and Figure chart of EL, below, I can see a potential downside price target in the $121 area.
Bottom line strategy: Traders should avoid the long side of EL for now as further declines look likely.
