ULTA | Ulta Beauty Inc. Trading Journal with VantagePoint

VantagePoint Trading Software is a forecasting tool that uses both end of day data and artificial intelligence to provide traders a forecast of market movement. These forecasts are 1-3 days in advance and help traders improve their timing on making trades and maximizing profit potential. The artificial intelligence software forecasts market movement for stocks, futures, Forex and ETFs. ULTA stock is in focus today….

This journal entry looks at the recent market movements of Ulta Beauty Inc. NASDAQ: ULTA

VantagePoint Trading Journal ULTA Stock

Representatives from the United States, Canada and Mexico are gathering in Mexico City today for the fifth round of NAFTA renegotiations. Discussions have already grown contentious with the Trump administration seeking radical changes, including a sunset clause that would end the trade agreement after five years unless all three countries agree to extend it. The talks, which began in August, are scheduled to last until the end of March 2018. We’ll keep a close eye on how the markets will react the news surrounding these talks.

In the meantime, we’ll use the powerful tools we have at our disposal to see how the markets are reacting to each other. Using the artificial intelligence forecasting software VantagePoint, we can analyze individual stocks, futures or ETFs and broad indexes like the S&P, Dow, and the Russell. After utilizing our VantagePoint platform, I am looking for value plays to the upside in strong sectors.  Let’s look at health and cosmetics company Ulta Beauty, Inc. (ULTA):

image of ULTA stock trading diary with VantagePoint
Bullish plays for ULTA haven’t boded well in the last 90 days. But, VantagePoint indicated a new crossover on 11-16 that could lead to potential profitable bull scenarios.

Using the predictive indicators embedded within the VantagePoint platform and its predictive AI technology, we will point out two significant things. We have a bullish crossover indicated by the blue predictive indicator line crossing above the black simple 10-day moving average on 11/16/17. We also see the VantagePoint propriety neural index indicator moving from the zero (0) to the one (1) position. This indicator measures strength and weakness for a 48-hour period. The move to the one (1) position further makes the case for a potential bullish scenario. Based on these indicators, I am willing to entertain a setup to the upside.

Strategy for Trading ULTA Stock

For those who are a straight stock trader, buying ULTA stock in the $206.00 – 207.00 area could prove wise. You are anticipating a continuing move to the upside. This would be a conservative way to enter ULTA without the limitation of time associated with other trading strategies. It would also be wise to consider placing a buy-stop order in the $200.00 area to mitigate potential losses.

For those more active traders with a shorter investment time horizon, a play with options could be an advantageous consideration. Because of the layered uncertainty in the market, it is prudent to buy ourselves some more time by going out to the regular December options.

From three simple inputs, we can compute the magnitude of the projected move through expiration.  Those three inputs are the underlying price, at-the-money implied volatility and the date of expiration. Performing this calculation for the ULTA stock yields a project move of approximately $26.00 to $27.00 or 12%. This targets the $240.00 price level through the December expiration.  Let us then consider a possible bullish set up using the ULTA December 230/240 call vertical paying $2.25. This will have a maximum risk of what one would pay for the spread or $2.25. The maximum reward will be the width of the spread less any premium paid or $7.75. This yields a reward to risk ratio of 3.44:1.  Given the trading environment outlined above, a trader must evaluate whether this reward/risk ratio is appropriate for his/her risk tolerance.

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