LVMH, a Symbol of Luxury, Doesn't Look So Hot on the Charts
Let's see how Chinese policies could cramp LVMH Moet Hennessy Louis Vuitton ADR's style.
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LVMH Moet Hennessy Louis Vuitton ADR LVMUY represents the world of luxury to millions of people around the world.
But luxury goods face an unattractive reality right now, as China could make imported products more costly to buy for the nation's population.
At least one money manager expects China to impose tariffs on European luxury goods as a retaliatory response to the European Union's tariff hike on Chinese electric vehicles. Some analysts have also pointed out that President Xi's "common prosperity" values conflict with western luxury companies promoting "bourgeois conspicuous spending."
More aggressive measures could be coming soon, some argue.
Details on luxury tariffs could be released after the completion of the third plenum. China's ruling Communist Party commenced its so-called plenum on Monday to map out the direction of the country's long-term social and economic policies.
Luxury companies in the past did not discount their products, but preferred to embellish them with more bells and whistles. This does not appear to be working.
Top luxury auto brands are now cutting prices. Meanwhile cosmetic companies are bundling products to hide the discounting and giving more "freebees".
Let's check out some charts.
In this daily bar chart of LVMUY, below, I can see that prices have traded lower since March. Prices trade below the declining 50-day moving average line and below the declining 200-day moving average line. The On-Balance-Volume (OBV) line is relatively weak and has not moved higher when prices rallied. The Moving Average Convergence Divergence (MACD) oscillator has spent much of the last 12 months below the zero-line.
In this weekly Japanese candlestick chart of LVMUY, below, I see a mixed to bearish picture. Prices are trading below the negatively sloped 40-week moving average line. The weekly OBV line has been weak since April 2023. The moving average convergence divergence oscillator has moved below the zero-line for an outright sell signal.
In this long-term weekly Japanese candlestick chart of LVMUY, below, I can see a longer-term advance followed by a major top formation.
In this daily Point and Figure chart of LVMUY, below, I can see a potential downside price target in the $135 area.
In this second Point and Figure chart of LVMUY, below, I used weekly price data with a five box reversal filter. Here the software shows us a price target in the $122 area.
Bottom line strategy: I did a quick and unscientific check of some luxury car prices in dealerships near me and they look "soft" to me. I will survey my wife later today to see what she is seeing in the pricing of cosmetics and scarfs.
Traders and investors should avoid the long side of LVMUY but if you need a new luxury car you might check out some of the deals out there.
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