Lululemon Athletica Inc. (LULU) makes and retails athletic apparel and accessories, including the forever popular yoga pants that many women love to wear both at the gym and on casual outings.
The stock closed Tuesday at $66.36, up 2.1% year to date and solidly in bull market territory at 39.3% above its post-election low of $47.64 set on May 30. The stock set its post-election high of $72.70 on Dec. 8, 2016, and is 8.7% below this level. Lululemon shares have had a volatile ride since trading as high as $81.81 on Aug. 25, 2016, then trading as low as $47.26 on May 31, 2017. This price movement can be evaluated using Fibonacci retracements of the decline from this high to this low.
Analysts expect Lululemon to post earnings per share between 52 cents and 55 cents when it reports results after the closing bell on Dec. 6. Wall Street looks for revenue growth to continue as margins improve on new designs to make you look great while you sweat at the gym. (See also: Lululemon Stock Could Head Into Long-Term Breakout.)
The daily chart for Lululemon
The daily chart for Lululemon shows horizontal lines that represent the Fibonacci retracement levels of the 42% decline from the August 2016 high to the low seen on May 31, 2017. The five price gaps lower or higher were in reaction to the past five earnings reports, so traders and investors should beware of the risk/reward this afternoon. The chart clearly shows a neutral zone between the 50% retracement of $64.55 and the 61.8% retracement of $68.61.
The weekly chart for Lululemon
The weekly chart for Lululemon is positive but overbought, with the stock above its five-week modified moving average of $64.72, and Lululemon has been above its 200-week simple moving average, or "reversion to the mean," which is currently at $57.86, since the week of June 30. The 12 x 3 x 3 weekly slow stochastic reading is projected to end this week at 84.90, solidly above the overbought threshold of 80.00.
Given these charts and analysis, my trading strategy is to buy weakness to my semiannual value level of $41.17 and to reduce holdings on strength to my quarterly risky level of $72.92. My monthly pivot (or magnet) is $67.42. (For more, see: Top 4 Consumer Cyclical Stocks for 2017.)