Today’s Big Stock: Estee Lauder Companies, Inc. (NYSE: EL)

For today’s article I will be focusing on a stock that is approaching a 52-week high again. As a reminder, when it comes to a stock hitting a 52-week high, I prefer to look for ones hitting a “NEW” high. To me, his would be a stock that hasn’t hit a new 52-week high in quite some time. In addition, and more importantly, I want the stock to have broken through a key area of resistance. This way I know that it wasn’t just any move higher, it was a key breakout.

The Estee Lauder Companies, Inc. is a manufacturer and marketer of skin care, makeup, fragrance and hair care products. Its products are sold in over 150 countries and territories under a number of brand names, including Estee Lauder, Aramis, Clinique, Origins, M.A.C, Bobbi Brown, La Mer and Aveda. It is also the global licensee for fragrances and/or cosmetics sold under brand names, such as Tommy Hilfiger, Donna Karan, Michael Kors, Sean John and Coach. These channels include over 30,000 points of sale, consisting of department stores, specialty retailers, upscale perfumeries and pharmacies and prestige salons and spas. In addition, its products are sold in freestanding Company-operated stores, its own and authorized retailer websites, stores on cruise ships, direct response television, in-flight and duty-free shops and certain fragrances are sold in self-select outlets.

To review Estee Lauder’s stock, please take a look at the 1-year chart of EL (Estee Lauder Companies, Inc.) below with my added notations:

 

After bottoming in October with the rest of the market, EL broke to a new high in November. However, the stock has been moving mostly sideways since then. During those last (4) months, EL has tested the $60 resistance on (5) separate occasions. The $60 resistance meets my definition of a clear resistance level that would signify an important 52-week high breakout if EL could manage to break above it.  If the stock does break above the $60 odds are it will probably be heading higher, most likely on a new uptrend.

The Tale of the Tape: EL has formed a key resistance level at $60, which would be a 52-week high breakout if EL could break above it. A long trade should be entered if EL breaks above $60, with a stop set below that level.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade.  Capital preservation is always key!

Good luck!
Christian Tharp, CMT