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Key Takeaways
- Ulta Beauty shares jumped 14% in extended trading on Wednesday after a regulatory filing revealed that Warren Buffett’s Berkshire Hathaway had purchased 690,106 shares in the cosmetics retailer during the second quarter.
- Since setting a record high in mid-March, Ulta Beauty shares have traded within a falling wedge, a chart formation that, while sloping downwards, indicates a bullish trend reversal.
- Amid the stock’s Berkshire-inspired jump, investors should watch key chart levels at $373, $406, $440, and $487.
Ulta Beauty (ULTA) shares surged nearly 14% in extended trading on Wednesday after a regulatory filing revealed that Warren Buffett’s Berkshire Hathaway (BRK.A, BRK.B) had taken a stake in the cosmetics retailer during the second quarter.
According to a 13-F filing made available after the close of trading Wednesday, the Omaha-based conglomerate purchased 690,106 shares of Ulta Beauty, with the size of the holding valued around $266.3 million as of June 30.
Berkshire’s investment comes as welcome news for shareholders in the specialty chain, whose share price, as of the close of trading Wednesday, has fallen 42% since the stock recorded its record high in March. In May, the company lowered its full-year fiscal 2024 outlook amid moderating demand.
Ulta beauty shares rose 14% to $375.50 in after-hours trading.
Below, we take a closer look at the technicals on Ulta Beauty’s chart and point out key price levels to watch out for.
Falling Wedge in Focus
Since recording their record high in mid-March, Ulta Beauty shares have traded within a falling wedge, a chart formation that, while sloping downwards, indicates a bullish trend reversal.
Prior to Wednesday’s post-market pop, buyers had defended the pattern’s lower trendline, enough to lift the relative strength index (RSI) indicator out of oversold territory.
Levels to Monitor Amid Berkshire-Inspired Jump
Amid Thursday’s expected Berkshire-inspired jump in Ulta Beauty shares, investors should monitor four key price levels.
The first sits around $373, an area on the chart where the price runs into a confluence of resistance from the October and May swing lows, the falling wedge’s top trendline and the downward sloping 50-day moving average (MA).
A close above this level could see the shares climb to $406, where they may encounter selling pressure from a horizontal line connecting the June 2023 swing low with multiple peaks and troughs from August last year to July this year.
Further buying may drive a rally to the $440 region, currently sitting just below the closely watched 200-day MA. This area would likely find resistance near a multi-month trendline linking the May 26, 2023 gap high, the August 2023 swing low, and the April 3, 2024 gap low.
Finally, a longer-term uptrend could test higher resistance near $487, where sellers may decide to lock in profits around the July 2023 swing high, which also roughly aligns with a period of consolidation from December to January that followed a stock gap.
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