Lululemon Stock Rebounds From Support After Strong Holiday Sales

Lululemon Athletica Inc. (LULU) shares rose more than 5% on Monday morning after the company issued better-than-expected fourth quarter guidance ahead of the ICR Conference. 

The company believes that fourth quarter revenue will reach $1.14 billion to $1.15 billion, which is higher than the $1.13 billion consensus forecast and puts comparable store sales growth into the mid- to high teens. Earnings per share are projected to be between $1.72 and $1.74, which is higher than the consensus forecast of $1.70 per share.

Lululemon has been investing in its online presence and focusing on menswear as a way to set itself apart from competitors like Nike, Inc. (NKE) and Under Armour, Inc. (UAA). MKM Partners attributed the gains to new customer acceleration and strong product acceptance, and the research firm maintained its Buy rating and price target of $177.00 per share on Lululemon stock.

Technical chart depicting the share price performance of Lululemon Athletica Inc. (LULU)

From a technical standpoint, the stock broke out from trendline resistance earlier this month, reached R1 resistance at $137.56 and moved lower to retest support. The stock rebounded from support during Monday's session and broke out above R1 resistance toward reaction highs of $145.00. 

The relative strength index (RSI) appears a bit lofty at 66.13, but the moving average convergence divergence (MACD) continues to see a strong move higher. These indicators suggest that the stock could see some near-term consolidation, but the long-term trend remains higher following the bullish fundamental developments.

Traders should watch for a move toward reaction highs and Fibonacci resistance at around $145.00. A breakout from those levels could lead to R2 resistance at $153.50 or even a retest of 52-week highs at around $165.00. If the stock fails to break out, traders could see some consolidation above R1 resistance at $137.56 before another move higher.

The author holds no position in the stock(s) mentioned except through passively managed index funds.

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