Ulta Earnings Miss Comes as Stock is Oversold

Ulta Salon, Cosmetics & Fragrance (NASDAQ: ULTA) is on our list of the most oversold stocks with a ConnorsRSI of 0.93. After the close yesterday, ULTA announced earnings for the third quarter and missed analysts’ expectation. For the quarter, the company earned $0.72 a share, $0.02 below the consensus estimate. For the fourth quarter, company officials told analysts to expect earnings of $1.07 to $1.10, significantly lower than previous guidance of about $1.24. In afterhours trading, the stock fell more than 20%.

Prior to the earnings announcement, ULTA had a PowerRating of 8 and was set up as a potential short-term buy. The stock could open significantly lower today and offers a potential trading opportunity.

PowerRatings are based on the relative strength or weakness of particular stocks or ETFs. The higher the rating, the greater the one week historical gain has been for stocks and ETFs with that rating. For best results, enter these trades with a limit order 3-7% below the previous day’s closing price. Higher % limit entries have historically shown a greater percentage of winning trades but higher % limit orders also reduce the chance of trade execution.

In the past, buying stocks with a rating of 8 on a 7% pullback the next day and selling five days later has been profitable 74% of the time. The average winner has gained 6.3%. Other entries and exits also show high winning percentages and large average gains.


ULTA is a high risk trade and call options could also be used as a way to limit risk. Aggressive traders could consider selling an out of the money put option, a bullish strategy that could deliver a gain if ULTA rises.

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All data is as of the end of day on 12/5/2013.