NEW DIRECTIONAL PUT PLAYS
Ulta Salon - ULTA - close: 89.39 change: -2.09
Stop Loss: 92.05
Target(s): early target: $85.25, longer target: $81.00
Current Option Gain/Loss: Unopened
Time Frame: 3 to 6 weeks
New Positions: Yes, see below
Why We Like It:
ULTA is a specialty retailer selling cosmetics, fragrances, hair care, and skincare products. The company is labeled as part of the services sector.
The stock had a rough time this spring. On Valentines day, Feb. 14th, the stock gapped down significantly on news that its President, CEO and director would be leaving the company a week later. Shares tried to bounce but then the stock plunged again just one month later on March 15th after report earnings. ULTA's earnings were better than expected but management issued a warning for the first quarter. That news sparked a sell-off down to $72.50 a share. Since then ULTA has clawed its way back.
Now the stock appears to be reversing under significant technical resistance. There is a small cloud of long-term moving averages that has kept ULTA from advancing higher in spite of the market's rally to new highs. Now ULTA is showing relative weakness with a -2.2% decline. This looks like a chance to launch bearish positions.
I am suggesting a trigger to buy puts tomorrow at the opening bell. More conservative traders may want to wait for ULTA to trade below its six-week trend line of higher lows (near the 10-dma) before initiating positions (see daily chart below).
Our short-term target is $85.25. I am also setting a longer-term target of $81.00.
- Suggested Positions -
buy the Jun $85 PUT (ULTA1322R85) current ask $2.75
Entry on May 10 at $---.--
Average Daily Volume = 1.1 million
Listed on May 09 2013