Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free weekly newsletter.
Estee Lauder (NYSE:EL) — This company manufactures and markets skin care, makeup and hair care products, as well as a variety of the more famous colognes and perfumes. The cosmetics/personal care industry that Estee Lauder belongs to is classified as non-cyclical. Non-cyclical stocks are typically more sought after during times of an economic slowdown as sales of these types of companies tend to hold up better than those of more cyclically exposed firms.
The weekly chart dating back to 2008 shows the sharp move higher in EL stock during the past two years. The white lines indicate that uptrend is still in place despite the recent price correction in the stock.
On the daily chart looking back to November 2010, note the support line near $86 that EL has bounced from several times so far in 2011. Also note the 200-day simple moving average (blue line), which the stock is currently battling with. Historically, this stock has respected its 200-day SMA as both support and resistance. Should EL again be able to overcome the 200-day SMA, the probability of the stock moving higher significantly increases.
On the close-up chart of EL looking back to early July, note the higher low that has formed (white uptrend line) earlier this week, coupled with the rising stochastics indicator.
The trade I see setting up here is to go long EL stock around $93 with a stop near $88, or for those that want to give this trade a longer leash, $86 may also work. The initial profit target is near $97 with a second target near the $100 mark.
- See Sam Collins’ Daily Market Outlook: Don’t Put Too Much Faith in This Rally
- See Serge Berger’s Daily Market Outlook: Why Traders Should Play it Safe for the Rest of the Week
- See Sam Collins’ Trade of the Day: Sell This Semi Stock Into Rallies
