One stock, up 7,500% since financial crisis lows, has more room to run, technician says
Consider it an Ulta-mate rally.
Shares of Ulta Beauty ULTA have roared around 7,500 percent higher in the past 10 years, far better than the 315 percent increase for the S&P 500 off its March 2009 intraday low.
Bill Baruch , president of Blue Line Futures, says the cosmetics retailer has more room to run.
"The chart has been extremely constructive," Baruch said on CNBC's " Trading Nation " on Wednesday. "You've got a trend line going back to 2014. It has tested it four times and it has held."
The next major test for the stock is whether it can break above years-long resistance, says Baruch.
"We're right back up to these highs from 2017 and 2018, so it's not all perfect. There is a ceiling of resistance there," added Baruch. "However, it has developed an ascending triangle, which is a bullish pattern. Look for a close, a clear close, out above $325 for a breakout and you could see another 15 to 30 percent upside."
An ascending triangle pattern typically suggests bullish momentum building toward a breakout. Ulta needs to rally 4 percent to reach $325 in what would mark a new record. Another 30 percent rally would take Ulta up to $422.50.
Its next big swing could come when the company reports earnings next week, according to Stacey Gilbert , head of derivates strategy at Susquehanna.
"This presents an opportunity for investors as we head into earnings who want to protect a position, who want to protect this recent rally," Gilbert said on "Trading Nation" on Wednesday. "The market is implying around a 7 percent move for the upcoming earnings."
A 7 percent swing in either direction puts Ulta's potential range at roughly $290 to $334 from the current $312 a share.
"Three of the last four earnings reports have seen at least a 6 percent move with last quarter seeing a 13 percent move, so I do think there's an opportunity here for investors who are concerned heading into earnings that there could be a pullback, that the risk reward for those puts is attractive," Gilbert said.
Ulta is scheduled to report earnings after the bell on March 14. Analysts anticipate 4 percent earnings growth and 9 percent sales growth over its holiday quarter, according to FactSet estimates.
Disclosure: Susquehanna is a market maker in the securities of ULTA.
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