During Monday's Mad Money program Jim Cramer gave a nod to Ulta Beauty (ULTA) , which begins rolling out to Target (TGT) locations this year, adding to its already strong retail and e-commerce footprint.
In our Sept. 10 review of ULTA we wrote that, "Beauty is in the eye of the beholder is the old saying. What I behold is that the weekly chart shows a long-term bullish pattern with the OBV line. Traders could go long ULTA on strength above $258.30 (wait for it) risking below $225 after that." Traders should have gone long ULTA around the early part of November.
Let's check out the latest charts of ULTA.
In the updated daily bar chart of ULTA, below, we can see how the rally unfolded when the shares finally broke out above $258.30. The shares are trading above the rising 50-day moving average line and we can see a successful test of the line at the end of January and early February.
The daily On-Balance-Volume (OBV) line shows strength from early August and confirms the price gains. The Moving Average Convergence Divergence (MACD) oscillator is above the zero line but has diverged bearishly from the price action. Prices have made higher highs from November to now but the MACD oscillator has not made a similar pattern. This is a bearish divergence and could foreshadow price weakness ahead as the strength of the advance is not increasing.
In the weekly bar chart of ULTA, below, we can see that the shares are trading in an uptrend above the rising 40-week moving average line.
The weekly OBV line is bullish and its rise confirms the price gains. The weekly MACD oscillator is also positive.
In this daily Point and Figure chart of ULTA, below, we can see a potential upside price target in the $432 area.
Bottom-line strategy: Traders who are long ULTA should raise stop protection to at least $305 from below $225. The round number of $400 is our next potential price target with maybe $432 after that. The old highs of early 2019 might provide some chart resistance.
