Ulta Beauty: Ugly Chart Ahead Of Q2 Report

Ulta Beauty Inc ULTA, a retailer of beauty products, was faring relatively better than most other retail counterparts for much of the year-to-period. Everything about the stock was beautiful up until early June. The company's fiscal first-quarter earnings,  released after the market close on May 25 revealed forecast-beating earnings per share and revenues. Ulta showed particular strength in e-commerce, which rose 70 percent. The company also raised its comp growth forecast for 2017. The stock ended the session up. 3.2 percent after gap-opening higher at $305.50 (from the previous session's close of $293.05) on May 26 in reaction to the results.

Following the earnings release, the stock closed higher for six straight sessions. The extended post-earnings run up took the stock to an all-time closing high of $313.73 on June 5. Ulta also touched a record high (intra-day) of $314.86 on the same day.

Including that week the stock posted weekly declines in eight of the past ten weeks. Even in those weeks the stock posted gains, the gains have been negligible.

Good tidings that came its way on July 14, did not offer Ulta a facelift. On the day, Goldman Sachs upgraded shares of the company from Neutral to Buy. The stock did react strongly to the upgrade at the open, as it gap-opened higher by $7.50 at $264.70. After advancing to a high of $267.48 intra-day, the stock squandered much of its early gains to end up merely $4.34. In fact, Ulta Beauty shares had more than doubled from its February 19, 2016, low of $146.77.

Subsequently, Oppenheimer downgraded Ulta on July 31, which did not do any damage to the stock. The company is scheduled to release its second quarter results after the market close on Thursday, August 24. Analysts, on average, expect the company to report earnings per share of $1.78 compared to $1.43 a year ago. Revenues are expected at $1.28 billion, up 20.20 percent. The expectations look upbeat when viewed against the recent retail earnings. Even with a solid earnings beat, there could be mega-sellers, who are either long-term holders, for prices lower than this, or short-term holders, who are caught trying to pick a bottom on the stock's way down.

The stock recently bounced off a support around the $237-$230 area. In the eventuality of a post-earnings pullback, this region could offer support to the stock. A violation of this level could take the stock to another long-term support around $208. A bearish crossover occurred recently, with the stock's 50-day moving average, or MA, ($267.24) moving below the 200-day MA, currently at $271.70. The stock has an overhead resistance around $248. With Stifel lowering its price target on the shares of Ulta Beauty, they are currently down 3.85 percent at $234.79.