Put e.l.f. on the Shelf as the Stock Surges to a 52-Week High

Here's why investors should consider taking profits now.

e.l.f Beauty Inc. (ELF) is up sharply Thursday on the heels of a profit and revenue beat and higher guidance. While ELF has rallied to a new 52-week high, I remain cautious on the stock because of the indicators.

Let me show you why.

In the daily bar chart of ELF, below, we can see that the shares have rallied sharply from late May. ELF is trading above the rising 50-day and the rising 200-day moving averages. We can also see a bullish golden cross buy signal with the 50-day line crossing above the 200-day line.

The daily On-Balance-Volume (OBV) line shows a rise the past two months but it has not broken above its November high like prices have down. This is a potential bearish divergence. The trading volume shows an uneven decline the past two months.

The 12-day price momentum study shows lower highs from July to August even though prices made higher highs. This is another bearish divergence and can foreshadow a downward reversal.

 

In this daily Point and Figure chart of ELF, below, we can see that ELF has reached an upside price target around $37. Reaching a price target can give technically oriented traders pause.

 

 

Bottom-line strategy: On most days I would be excited about the new highs on ELF but today I would be cautious because price momentum has slowed. Protect your profits if you are long.

 

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