HAL9000
Long

Bad news already in the price: Buy on broker downgrade.

NASDAQ:LULU   LULULEMON ATHLETICA INC
84 3 7
23 days ago
Current consolidation range 54-59.
We are at the bottom of this range.
This bottom also corresponds to the long term support line, visible on weekly chart below.
Stock downgraded this morning by Credit Suisse but fails to break the support.
Believe most bad news is in the price.
Short interest on the stock is significant: 23% of float - Makes short squeeze probable on any marginally good news.
Consensus is a BUY with target price at 69.
Looking at a break above the 59 resistance.
Target 66
Stop loss 54
RR 5x

snapshot
3 days ago
Comment: Every weakness towards 55 has been met with a strong rebound, such as yesterday. This validates our stop-loss at 54 and the current trading channel ($54-$59). Still awaiting a breakout to the upside on the basis of improving technical picture and a belief that “most bad news is in the price”. Short interest, as a % of float, has also been decreasing, another positive sign.
3 days ago
Comment: Day of reckoning tomorrow as the company release quarterly earnings on Dec 7 after the close, contrary to what is indicated on the graph.
3 days ago
Comment: Those who are not in this trade might want to take advantage of the volatility around earnings:

1. Dec 16 maturity --> Buy call $59 / Sell put $54 = -$0.51/share (indicative) = 0.89% cost

2. Jan 20 maturity --> Buy call $59 / Sell put $54 = -$0.56/share (indicative) = 0.98% cost
a day ago
Trade active: Expected break to the upside has taken place as expected on the earnings, and under the scenario where all the bad news is in the price. The current volume after the first half hour of trading is already twice the average daily volume, pointing to significant institutional interest. Previous resistance at 66 has become support. Keep long with a stop-loss at 66. Those who put on the options strategy should exercise the calls and keep the shares.
MunTrader
19 days ago
I'm in agreement with your idea, and was thinking along the same lines. I will add one caveat. Both the 100 SMA and the 200 SMA are converging at $66. I would buy here, and watch at $66. It may stall out there. Still a good run from $54 to $66.
+1 Reply
HAL9000 PRO MunTrader
16 days ago
@MunTrader, Agreed. SMA200 slightly >66 provides resistance, confirmed by the convergence you talk about - Hence my $66 target. The tricky part will be to clear the 59-60 area which shows multiple resistances on 3 main time frames (D, W, M). I believe the earnings on Dec 14 might provide the needed catalyst for an upswing. Currently still long at $55.50.
Reply
HAL9000 PRO
15 days ago
At 58.98 on the intraday high of yesterday, LULU touched, failed to break and therefore just re-confirmed the significant 59 resistance.
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