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Technically Speaking, Lumber Liquidators Stock Is Not Out Of The Woods Just Yet

Technically Speaking, Lumber Liquidators Stock Is Not Out Of The Woods Just Yet - Lumber Liquidators Holdings, Inc NYSE:LL

Lumber Liquidators Holdings Inc LL shares are surging 3.4 percent in early Wednesday trading after the company cleared yet another legal hurdle related to product safety. A California court has ruled in favor of Lumber Liquidators in a 2014 lawsuit claiming that the company didn’t provide a formaldehyde warning to its California customers.

The stock’s share price jumped as much as 25 percent following news in June that the Consumer Product Safety Commission would not be fining Lumber Liquidators or forcing a product recall.

The company did, however, agree to pay $2.5 million as part of a settlement with the California Air Resources Board in March.

Related Link: Argus Positive On Stocks For The Remainder Of 2016, But BTIG Warns Of A Pullback

Despite the good news, the stock remains down 73.4 percent since the beginning of 2015. The company’s PR nightmare began with a “60 Minutes” episode that exposed potential health and safety violations related to the formaldehyde in its laminate flooring.

Now that Lumber Liquidators has avoided any major financial damage from the scandal, the only real damage seems to be the blow to its reputation. Still, with the stock down roughly 85 percent from its 2013 highs, the selloff and negative sentiment may be overdone at this point.

From a technical perspective, however, this week's good news still hasn’t propelled the stock above the $18–19 resistance level that has been in place throughout the past year. If the stock doesn’t follow up Wednesday’s rally with a breakout above $18, it could soon be headed back down to test long-term support in the $10–12 range.

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