Cosmetics giant Estee Lauder Cos. (EL) gapped sharply lower on the opening Tuesday despite an earnings beat as traders reacted to management's cut of their full-year guidance.
Let's check out the EL charts and indicators.
In the daily bar chart of EL, below, we can see that the shares have been in a decline from early January. Prices are trading below the declining 50-day moving average line and below the declining 200-day line.
The trading volume has been more active this year and the On-Balance-Volume (OBV) line shows weakness from September telling us that sellers of EL have been more aggressive. The trend-following Moving Average Convergence Divergence (MACD) oscillator is bearish.
In the weekly Japanese candlestick chart of EL, below, we can see a bearish picture. Prices are in a downtrend as they trade below the declining 40-week moving average line.
The weekly OBV line is pointed lower. I can see a number of recent upper shadows as traders rejected the highs. The MACD oscillator is bearish but there has been some slightly narrowing of the two moving averages that comprise this indicator.
Bottom-line strategy: In our October 26 review of EL we gave a $374 price target, which was reached before prices turned lower. With the weak technical picture now traders should avoid the long side of EL as we anticipate lower prices ahead.
