Thinking about retail? Look at Ulta Salon (ULTA) and Footlocker (FL). Different strokes for different folks. (November 11, 2015)
ULTA XRT ULTA FL ULTA
We’re looking at Ulta ( NASDAQ:ULTA ). I cover this a bit in the Strategy Session tonight, but don’t go there, not right now. Retail ( NYSEARCA:XRT ) is not where you want to be, because nobody else seems to want to be there. Things are selling off, basically because of Macy’s, but competitors aren’t doing that well either. Who’s going shopping in stores any more? Well, I’ll tell you, Ulta ( NASDAQ:ULTA ), bricks and mortar, website, they kind of got it all and there’s a lot of people that care how they smell and how they look, how their hair looks. This is a stock that’s been consolidating for quite a while.
I wouldn’t be buying it right here. You’re not getting paid, there’s no dividend. If it falls back to say, 160.00, THEN I would look to buy it. And the reason I would is, because it’s close to the 200-day moving average. It gives you a defined risk. The 200-day moving average (which by the way will continue to go higher), you buy it as close to the 200-day moving average as you can, because the stock’s always been ABOVE the 200-day moving average for a long, long time. And then you keep a stop set just a little below there to define your risk.
But if you’re buying it right now, as long as the stock ultimately breaks out (did you get that play on words, Ulta…ultimately?), as long as it breaks out, then you’re going to make money. This is known as a “bearish engulfing” pattern, where the stock gapped up above yesterday’s intraday high and has closed below yesterday’s intraday low. And that was on VOLUME, heavier than average volume. So you look at this and this is a stock, that for right now, is under distribution. I like Ulta ( NASDAQ:ULTA ). Everybody who’s been a member knows I like Ulta ( NASDAQ:ULTA ), but you also know that I like stocks that are moving higher.
The longer this drifts sideways, the better it is to me, because you’ve kind of raised the average cost basis of folks that have just bought the stock. As it is, a lot of cost basis of a lot of people is 165ish, something like that. So when the company reports earnings on December 3rd, as long as the earnings are okay, the stock should probably continue the uptrend, because it is in an uptrend. So I would just want to wait on Ulta ( NASDAQ:ULTA ). Wait for a better entry. And by the way, if the stock breaks out 175.00 with out you, well, so you missed the BEST entry, get the next entry and buy the stock. You know, “easy-peasy”.
One thing that you don’t want to be doing is doing Foot Locker ( NYSE:FL ). Foot Locker ( NYSE:FL ), lower highs, lower lows. I see some people in Stock Market Mentor and Option Market Mentor looking for short candidates. Here’s a short candidate, don’t short it now; you missed that short. But if the stock starts rallying back up to the 200-day moving average, and at some point it’s going to rally, that’s when you want to look to short; short, short, and short.
So if the stock rallies up a bit this is when you want to be looking to short the stock, because you would keep your buy stop just like right up above here. You don’t want to have a buy stop at 67.00, $68.00 when you’ve shorted at 62.00. You’d rather see the stock rally up a little bit, and then start rolling over, and you short the stock at 65.00, 66.00, maybe even 67.00. So in my view, that’s your trade on Foot Locker ( NYSE:FL ) as well as Ulta ( NASDAQ:ULTA ).
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