Estee Lauder's 4.43% Cumulative Gain Reflects Uptrend and Technical Strength

The Estee Lauder (EL) has seen a 3.11% gain over two consecutive sessions, with a 4.43% cumulative rise, suggesting short-term bullish momentum. Recent price action reveals a series of higher highs and higher lows, consistent with an uptrend. Key support levels appear to form around $86.57 (August 20 close) and $84.42 (August 20 low), while resistance clusters at $91.23 (August 22 high) and $95.26 (August 13 high). A potential bearish reversal pattern, such as a "shooting star" on August 22, may indicate exhaustion at current levels, but the subsequent rebound suggests buyers remain active.

Candlestick Theory

The recent rally has formed a "higher high-lower low" structure, reinforcing an uptrend. A key support level at $86.57 (August 20) has held multiple times, with a rejection observed on August 20. Resistance at $95.26 (August 13) appears robust, with a failed breakout attempt on August 13 followed by a pullback. A "bullish engulfing" pattern on August 26-27 suggests continued short-term strength, but traders should monitor for bearish divergence if the price fails to surpass $95.26 while RSI remains elevated.

Moving Average Theory

The 50-day moving average (approx. $88.50) currently sits below the 200-day MA (~$86.00), indicating a broader bullish bias. However, the 100-day MA (~$89.00) crossing above the 200-day MA in recent weeks suggests intermediate-term strength. Short-term momentum aligns with the 50-day MA, as the price has closed above it for three consecutive sessions. A breakdown below the 50-day MA would signal a potential shift in trend, while a close above $95.26 could validate a multi-week bullish trend.

MACD & KDJ Indicators

The MACD histogram has turned positive, with the MACD line crossing above the signal line on August 26, reinforcing bullish momentum. The KDJ indicator shows overbought conditions (K at 85, D at 80), suggesting a possible near-term correction. However, the stochastic oscillator’s slow line remains above 70, indicating sustained buying pressure. A bearish crossover in KDJ or a MACD histogram contraction could precede a pullback to the $88.68–$89.82 range.

Bollinger Bands

Volatility has expanded, with the upper band reaching $93.25 (August 27 high) and the lower band at $84.42 (August 20 low). The price’s proximity to the upper band, coupled with a narrowing range in recent days, suggests potential for a breakout or consolidation. A close above the upper band would confirm bullish momentum, while a retest of the lower band could trigger a rebound.

Volume-Price Relationship

Trading volume spiked on August 27 (4.06M shares) and August 22 (4.05M shares), validating the price gains. However, volume declined on August 26 (3.81M shares), hinting at waning conviction. A sustained increase in volume above 4.5M shares would strengthen the case for a bullish continuation, while a divergence (e.g., higher highs with lower volume) could signal weakening demand.

Relative Strength Index (RSI)

The 14-day RSI stands at ~72, nearing overbought territory. While this suggests a potential pullback, it also aligns with the broader uptrend. A drop below 60 would indicate weakening momentum, whereas a move above 75 could trigger profit-taking. The RSI’s recent divergence from price action (e.g., lower highs in RSI despite higher price) warrants caution.

Fibonacci Retracement

A key retracement level at 61.8% ($90.60) has acted as support during pullbacks, with the price rebounding from this level on August 26. The 78.6% retracement at $93.34 coincides with the August 13 high and may serve as a critical resistance. A breakout above this level could target the $95.26 psychological barrier, while a breakdown below $88.68 (38.2% retracement) would invalidate the bullish case.

Backtest Hypothesis

The provided backtest, which employs a standard 14-day RSI strategy, yielded a -11.4% return over 3.5 years, with a Sharpe ratio of -0.17. This underperformance highlights the limitations of relying solely on RSI overbought/oversold signals for EL. For instance, the strategy’s -5.7% average losing trade versus +2.0% average winner underscores the risk of false breakouts in a volatile stock like EL. Integrating Fibonacci retracement levels and volume-confirmed breakouts (e.g., above $93.34 with >4.5M volume) could refine entry/exit rules, aligning with the technical analysis’s emphasis on multi-indicator confluence.