Ulta Beauty (ULTA) shares saw a significant surge of nearly 14% in extended trading on Wednesday following the news that Warren Buffett’s Berkshire Hathaway (BRK.A, BRK.B) had acquired a stake in the cosmetics retailer during the second quarter. The investment, revealed in a 13-F filing after the market close, disclosed that Berkshire had purchased 690,106 shares of Ulta Beauty, valued at approximately $266.3 million as of June 30.
This investment comes as positive news for Ulta Beauty shareholders, who have seen the stock price decline by 42% since reaching a record high in March. In May, the company revised its full-year fiscal 2024 outlook due to weakening demand. The post-market trading saw Ulta Beauty shares rise to $375.50, reflecting investor enthusiasm following Berkshire’s investment.
Technical Analysis: Falling Wedge Pattern
Since hitting its all-time high in mid-March, Ulta Beauty shares have been trading within a falling wedge pattern. Despite the downward slope of this pattern, it actually signals a potential bullish trend reversal. Prior to the post-market surge on Wednesday, buyers had been defending the lower trendline of the falling wedge, leading to a rebound in the relative strength index (RSI) from oversold levels.
Key Price Levels to Watch After Berkshire’s Investment
Following the anticipated jump in Ulta Beauty shares driven by Berkshire’s investment, investors should keep an eye on several crucial price levels:
1. $373 Level: This level represents a confluence of resistance from the October and May swing lows, the top trendline of the falling wedge pattern, and the 50-day moving average. A successful close above this level could pave the way for further upside potential.
2. $406 Level: At this price point, Ulta Beauty shares may face 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. Overcoming this resistance could lead to further gains.
3. $440 Level: The $440 region is just below the widely monitored 200-day moving average. Resistance is likely to be encountered near a multi-month trendline linking key price points, suggesting a potential obstacle for further price appreciation.
4. $487 Level: In the longer term, Ulta Beauty shares could test higher resistance around $487, where sellers may look to lock in profits near the July 2023 swing high. This level also aligns with a period of consolidation following a stock gap earlier in the year.
Investopedia Disclaimer: The comments, opinions, and analyses expressed are for informational purposes only. Readers are advised to refer to the disclaimer for warranty and liability information. The author of this article does not hold any of the mentioned securities as of the writing date.
