U.S. stocks set another all-time high on Monday — and the session feels a bit different. As we’ve noted in this space before, the rally of the last few months has been strangely quiet.

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Indeed, the 0.78% gain in the S&P 500 was the second-largest daily rally of the last six weeks. The index still has gained nearly 5% over that stretch. This simply has not been a bull market full of irrational exuberance, or anything close. Rather, U.S. stocks have marched steadily higher at a relatively modest pace.

With five weeks left in the year, the hope is that Monday’s bigger rally is the first step in a so-called “melt up” that will drove more gains heading into 2020. If that’s the case, Tuesday’s three big stock charts highlight potential opportunities. None of the three stocks are necessarily cheap, but all have a chance to gain if sentiment strengthens. The one catch might be that these big stock charts show real risk if broad market strength doesn’t materialize.

Costco Wholesale (COST)

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The first of Tuesday’s big stock charts, Costco Wholesale (NASDAQ:COST), actually looks a bit dicey at the moment. There’s little argument about the strength of Costco as a business, but recent trading suggests some concern about valuation near $300:

• A multiple top usually is a bearish signal — and it’s not the only one. COST stock has slipped out an uptrend that has held since the spring. And a dip below the 20-day moving average leaves the 50-day average as a key level. If Costco stock slips below that level, the next stop is $285, followed by the 200DMA.
• Again, COST stock hardly seems like the stock that investors should ever worry about. It has been one of the market’s great long-term investments. Changes in the retail industry seemingly have had no impact on its growth. But valuation is a concern: COST stock trades at 32x next year’s consensus earnings estimate. That’s on the back of an projected 8% increase in profits year-over-year after just a 5% increase in fiscal 2020 (ending August). It is fair to wonder whether the earnings multiple assigned COST can expand any further — which limits the potential upside here.
• A broad market rally likely will pull COST higher, and potentially drive an even higher valuation. That aside, there’s at least some reason for caution, particularly with fiscal first-quarter earnings due on Dec. 12. Are the ‘omnichannel’ efforts underway at Walmart (NYSE:WMT) and Target (NYSE:TGT) a potential threat? Will Amazon’s one-day shipping pull away sales? It might seem wise to ignore the noise and simply own COST stock, but the chart, the fundamentals, and the competitive environment suggest it might not be that simple.

Idexx Laboratories (IDXX)

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Like Costco, Idexx Laboratories (NASDAQ:IDXX) has been a long-term outperformer. Shares have gained 890% over the past decade and have more than tripled since the beginning of 2016. But like COST, the second of Tuesday’s big stock charts shows some weakness and the fundamental aspects of the case suggest caution:

• The weakness of late and the 2% decline on Monday both are worrisome in the context of a bullish market. Meanwhile, IDXX stock is hugging the low end of a broadening descending wedge. That pattern often portends a reversal — but if a stock breaks through the bottom, the weakness can accelerate. That risk seems reasonably high at the moment given IDXX now trades below all three moving averages and has weakened on reasonably high volume.
• Fundamentally, the concerns are obvious. Idexx Laboratories stock trades at 46x next year’s consensus EPS. Growth is solid, but the 13% increase in profits expected next year on its face isn’t enough to support such a steep valuation.
• That said, investors have generally been bullish on the animal health space in which Idexx Labs operates. Animal prescription manufacturer Zoetis (NYSE:ZTS) too has gained strongly in recent years, and ZTS stock earlier this month had a chart that similarly looked concerning, but shares managed to rebound. Investor optimism toward the sector could lead to a similar result for IDXX stock.

Ulta Beauty (ULTA)

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Like COST and IDXX, Ulta Beauty (NASDAQ:ULTA) seemed bulletproof for years. At July highs, ULTA stock had more than tripled in five years. But an ugly second quarter report in late August sent shares plunging 30%, and the third of Tuesday’s big stock charts doesn’t yet suggest a rebound:

• A brief post-plunge rally in September faded quickly, and ULTA has taken another leg down in recent sessions. Shares now trade below all three moving averages and touched a 26-week low on Monday. In this market, pretty much every stock that looks cheap has caught a bid at some point, but investors haven’t given this busted growth name much of a look. With earnings looming next week, it doesn’t seem like Ulta Beauty is inspiring much confidence at the moment.
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  That said, looking to the weekly chart, there is a bit more room for optimism from a technical standpoint. ULTA is back where support held during the market-wide sell-off in December. And it’s below levels that provided resistance earlier last year, which potentially have reverted to support.

• The trading of late certainly makes next week’s earnings hugely important. ULTA stock is downright cheap relative to past valuations, at less than 20x the midpoint of this year’s EPS guidance. Q3 numbers did disappoint, but same-store sales still increased over 6%. There no doubt is room for a rally here. Ulta simply needs a much stronger earnings report this time around — or a solid release combined with a bullish market willing to take on more risk.

As of this writing, Vince Martin has no positions in any securities mentioned.