Ulta Beauty Shares Surge 14% After Warren Buffett’s Berkshire Hathaway Takes Stake
Ulta Beauty (ULTA) shares experienced a significant surge of nearly 14% in extended trading on Wednesday. This surge came 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. The filing disclosed that Berkshire Hathaway purchased 690,106 shares of Ulta Beauty, with the holding valued at approximately $266.3 million as of June 30.
This investment by Berkshire Hathaway comes as welcome news for Ulta Beauty shareholders. The company’s share price has fallen 42% since reaching its record high in March. In May, Ulta Beauty lowered its full-year fiscal 2024 outlook due to moderating demand. The market responded positively to Berkshire Hathaway’s investment, with Ulta Beauty shares rising to $375.50 in after-hours trading.
Technical Analysis: Falling Wedge Formation
Since reaching its record high in mid-March, Ulta Beauty shares have been trading within a falling wedge formation. A falling wedge is a chart pattern that indicates a bullish trend reversal, despite its downward slope. Prior to the surge triggered by Berkshire Hathaway’s investment, buyers had successfully defended the lower trendline of the falling wedge. This defense was strong enough to push the relative strength index (RSI) indicator out of oversold territory.
Key Price Levels to Monitor
With the expected surge in Ulta Beauty shares following Berkshire Hathaway’s investment, investors should pay attention to four key price levels. The first level to watch is around $373, where the price may encounter resistance from a confluence of factors. These factors include resistance from the October and May swing lows, the top trendline of the falling wedge, and the downward sloping 50-day moving average (MA).
If Ulta Beauty shares close above $373, they could climb to $406. At this level, selling pressure may arise 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 could drive a rally to the $440 region, which is just below the closely watched 200-day MA. This area may face resistance from a multi-month trendline linking the May 26, 2023 gap high, the August 2023 swing low, and the April 3, 2024 gap low.
Lastly, if a longer-term uptrend develops, Ulta Beauty shares could test higher resistance near $487. Sellers may decide to lock in profits around the July 2023 swing high, which also aligns with a period of consolidation from December to January following a stock gap.
Conclusion
Ulta Beauty shares experienced a significant surge after Warren Buffett’s Berkshire Hathaway revealed its stake in the cosmetics retailer. This investment comes as a positive development for Ulta Beauty shareholders, as the company’s share price has been on a decline since reaching its record high in March. Technical analysis suggests that Ulta Beauty shares have the potential to reverse the current downward trend and reach key price levels. Investors should closely monitor these levels to gauge the future performance of Ulta Beauty shares.
Disclaimer: The comments, opinions, and analyses expressed in this article are for informational purposes only. The author does not own any of the securities mentioned.
