Skin care company Estee Lauder (EL) reported its fourth-quarter results last Friday, beating top- and bottom-line estimates and sliding fiscal year 2015 guidance within expectations, too. EL stock now displays a technically tight pattern that has good odds of resolving to the upside — and active investors and traders can take advantage of that pattern.
Estee Lauder earnings grew 175% year-over-year to 66 cents per share, topping the analyst estimate by a dime. Meanwhile, revenues climbed 13% higher to $2.73 billion, topping expectations for $2.66 billion. These results were driven by sales improvement in emerging markets, as well as better operating markets.
The company now sees EPS for FY 2015 coming in a range of $3.10 to $3.20.
All of this led EL stock to close marginally higher on Friday, and shares arguably could have traded much higher if it weren’t for a midday geopolitical scare headline crossing the tape and options expiration pinning stocks to certain strikes.
EL Stock Charts
If we look at the multiyear weekly chart of EL stock, we note that it has been a steady incline, but the incline arguably has been rather steep off the 2009 low. From early 2009 into late May/early June of this year, Estee Lauder had rallied about 680%, but at the same time, the price action over the past 18 months or so has been mostly consolidation, which could have provided another base off which Estee Lauder shares could jump higher.
On the daily chart, EL stock so far in 2014 has seen a good U-turn move, with a 15% selloff into the early February lows followed by a quick rebound into late May. Over the past two-and-a-half months, Estee Lauder has mostly consolidated the February-to-May rally, and has done so while holding above its 100- and 200-day simple moving averages (blue and red lines, respectively).
The 2014 U-turn, through the eyes of technical analysis, could be looked at as a so-called bullish cup-and-handle formation, with the U-turn being the proverbial cup and the recent consolidation period looking like a handle. The formation ultimately would be bullish on a breakout of the consolidation pattern and past the diagonal resistance line from early June.
Active investors and traders could consider buying EL stock on a break past last Friday’s intraday highs for a move toward the $80 mark. For risk management purposes, any quick bearish reversal below last Friday’s lows should be taken seriously.
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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.