Are You Still Holding Restoration Hardware? Sell Now

Its chart shows the company has gone as far as it can go for the moment.
By Richard Saintvilus ,

Restoration Hardware (RH) - Get Report stock has gone as far as it can, according to its chart. Why are you still holding this stock? Time to take some money off the table and move on to better growth prospects.

Once, this stock was a buy. It is trading at a forward price to earnings multiple of 18, which I believe is fair value relative to the S&P 500 (SPX) index's P/E of 17. The stock has delivered 17% gains, reaching a high last week at $30.20 on Friday despite a steep deline after it missed analysts' first-quarter earnings.

RH shares closed Tuesday at $29.55. What's next? Take a look at the chart, courtesy of TradingView.

From Tuesday's close, RH stock is back above its 20-day moving average at $27.93 (blue line). Despite the strong 14% rise from its 52-week low, however, the chart remains bearish. RH stock last week could not break resistance at $31.01 (thin red line). It appears that the shares will meet strong selling pressure with each approach near $30.

For the stock to regain a buy signal, one of two things must happen.

The stock needs to break $31.01 and recapture the 50-day average at $33.06 (pink line) or it needs to consolidate and fall back to its support level at around $25 (green line). Until either of these two things happen, the stock is no no-man's land. Instead of risking being trapped, take the 14% gains and wait for the chart to say it's time to get back in.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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