Ulta Salon (ULTA) New High Entices Bulls

Upbeat analyst attention sent Ulta Salon, Cosmetics & Fragrance, Inc. (ULTA) to a record peak

Apr 15, 2015 at 10:44 AM
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Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ:ULTA) hit a record high of $156.30 earlier -- and was last seen up 0.9% at $154.81 -- after Piper Jaffray raised its outlook on the shares to "overweight" from "neutral," and increased its price target to $170 from $158, echoing the general consensus seen among the brokerage bunch. Option traders are responding in kind, with calls trading at 1.4 times what's typically seen at this point in the day, and outpacing puts by a nearly 4-to-1 margin.

Receiving notable attention is ULTA's April 155 call, where it appears new positions are possibly being purchased for a volume-weighted average price (VWAP) of $1.23. Based on this average entry price, breakeven for today's call buyers at this Friday's close -- when front-month options expire -- is $156.23 (strike plus VWAP), just a chip-shot away from today's milestone.

Expanding the sentiment scope reveals traders have shown a distinct preference for calls over puts in ULTA's options pits of late. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), ULTA's 10-day call/put volume ratio of 7.31 ranks 1 percentage point from a 52-week peak. Echoing this is the equity's Schaeffer's put/call open interest ratio (SOIR) of 0.31, which rests at an annual low. In other words, short-term speculators are more call-heavy now than they've been at any other point during the past year.

This glass-half-full approach shouldn't be too surprising, considering the stock has added 72% over the last 12 months. Helping lift the shares higher since last July has been their 30-day moving average, although more recently, Ulta Salon, Cosmetics & Fragrance, Inc.'s (ULTA) 10-day trendline has emerged as support.

Daily Chart of ULTA Since April 2014 With 10-Day and 30-Day Moving Averages
 

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