Chart of the Day – Restoration Hardware ($RH)

by Dan December 10, 2015 1:54 pm • Chart of the Day• Commentary

Event: Restoration Hardware (RH) reports Q3 results tonight after the close. The options market is implying a whopping 10% one day move, which is rich to the 4 qtr average of about 6%, and the 8% average since its 2012 IPO.

RH caught my eye because of the large implied earnings move, but also the chart is quite interesting, down nearly 20% since making a new all time high on November 4th, and quickly approaching a 52 week low, placing the stock down about 10% on the year:

[caption id="attachment_59150" align="aligncenter" width="600"]RH 1yr chart from Bloomberg RH 1yr chart from Bloomberg[/caption]

Taking a longer term view, since the company’s November 2012 IPO at $24, the stock has held the uptrend like a boss. Until its recent break:

[caption id="attachment_59152" align="aligncenter" width="600"]RH 3yr chart from Bloomberg RH 3yr chart from Bloomberg[/caption]

So depending on your fundamental view of RH, there are two ways you could perceive the two charts above. If positive on the potential for the company to beat Q3 and raise forward guidance causing the stock to bounce, then the first chart of the one year performance shows $85 as a decent technical support, and a level that bulls could use as a stop.

On the flip side, a miss and/or a guide down or any signs of decelerating growth could cause investors to rethink the stock’s premium valuation (currently trades 28x expected current years eps that consensus has growing at 16%) then this month’s correction from an all time high, breaking the long term uptrend is quite troubling. There is little technical support between current levels and $80, and then below that there is an air-pocket till $70.