L-Shaped Short Pattern

[Mike]

NUS set up a possible L-Shaped shorting pattern. In Bill O'Neil's/Gil Morales' book How to Make Money Selling Stocks Short this was identified as a sharp drop and then a tight sideways pattern as the stock does not have enough energy to rise in price. In one case they identified the pattern as "walking the plank", a reference to the practice of punishing wayward pirates by making them walk the plank into the ocean. The chart below shows the NUS L pattern. The job for someone wishing to short this pattern is to get short as high in the sideways consolidation as possible and wait for a drop. Essentially anywhere in the range of 81-90.

[barbados11]

Mike, thanks for this. Would you consider ULTA a plank walker here?

[Mike]

Mike, thanks for this. Would you consider ULTA a plank walker here?

ULTA definitely was a plank walker late last year and seems to have found a lower level plank to walk. What is not quite attractive is the prior low of 72.51 is only 15.5% below the current price. The expectation is that if ULTA jumps off the end of the plank that it would under cut the prior low and rally. I prefer selections that have 20% or more for a profit target.

[barbados11]

That makes sense. Thanks Mike.

Pablo

ULTA definitely was a plank walker late last year and seems to have found a lower level plank to walk. What is not quite attractive is the prior low of 72.51 is only 15.5% below the current price. The expectation is that if ULTA jumps off the end of the plank that it would under cut the prior low and rally. I prefer selections that have 20% or more for a profit target.