Exercising a Trade in Lululemon Athletica

• Posted by Greg Harmon
• on August 1st, 2016

The trading world is supposed to be black and white. No gray areas. Your trade either triggers or it doesn’t. It either continues or you get stopped out. You never stretch for an entry. But that is not the case in the world of exercise. One company has made a very big name for themselves making tight fitting stretchy clothes. Lululemon athletica ($LULU), the maker of those athletic pants that every woman wears, has become a household name. And their stock is looking good too, possibly ready for a trade. Just don’t stretch to enter it.

The chart below shows the price history of Lululemon over the past year. After falling from a consolidation box in September, it built an expanding wedge over the next 4 months as it worked through a rounded bottom. The price sprung higher out of the wedge at the end of December right back to that prior consolidation box. It stayed there for another 4 months before the move started in May broke the box to the upside. This gave a target of about 79, where it sits now.

That brings you up to date. Going forward the stock is consolidating under resistance, with Bollinger Bands® that are squeezing in. This is often a precursor to a big move. The momentum indicators are bullish. Th RSI is in the bullish zone and rising. The MACD is leveling after a pullback, holding in positive territory. A look at the leg moving high (in the chart, not the picture) shows it was actually two steps of equal length with a slight pullback and consolidation in between before rising again. This the first 2 legs of 3 Drives pattern. The third leg gives an upside target to 88. This triggers on a break above resistance. Wait until then. Don’t stretch for it.

Want to learn more about Dragonfly Capital Views?
Dragonfly Capital Views Performance Through July 2016 and sign up here

If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

blog comments powered by Disqus