Buffett Bought a Beauty, But I Can't Stop Looking at the Charts
Ulta's shares are jumping on news that Berkshire Hathaway took a position in the company in the second quarter. Let's see if the charts give us a good foundation.
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Shares of Ulta Beauty ULTA have jumped sharply higher Thursday as traders reacted to the news that Buffett's Berkshire Hathaway BRK.A BRK.B bought shares in the second quarter according to a 13F filing released Wednesday.
Let's check out the charts of ULTA for clues for some guidance.
In the daily bar chart of ULTA, below, I can see that prices have been on a downward path since March. ULTA has been trading below the declining 50-day moving average line and below the declining 200-day moving average line.
The On-Balance-Volume (OBV) line has been weakening the past five months, which suggests that sellers of ULTA have been more aggressive than buyers. Buffett's traders must have been given instructions to only buy what is being offered in the market and not become aggressive buyers. Smart strategy and it hides their purchases until they have to report their actions.
The Moving Average Convergence Divergence (MACD) oscillator is below the zero line but starting to narrow towards a cover shorts buy signal.
In the weekly Japanese candlestick chart of ULTA, below, I see a terrible chart picture. No technical analyst that I know and respect would be recommending buying this security. Prices have been trading below the 40-week moving average line.
The weekly OBV line is pointed down and the MACD oscillator is clearly bearish. Why try to catch a falling knife?
In this daily Point and Figure chart of ULTA, below, I can still see a bearish price target. It will take a lot of basing to turn this chart bullish, in my opinion.
In this weekly Point and Figure chart of ULTA, below, I can see another bearish picture.
Bottom line strategy: Warren Buffett was a student of Benjamin Graham and he was a father of fundamental analysis. He did not read charts. I am a chart reader and cannot recommend purchase of shares of ULTA. If a good low or better still a base forms then I may well change my opinion.
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