Three Push Pattern to a Reversal in Lululemon LULU

Sep 2, 2016: 9:26 AM CST

The “Three Push” Pattern is one of my absolute favorite price patterns to play.

Lululemon (LULU) – fresh off a bearish earnings surprise – gives us the most recent example of this larger pattern and teh powerful reversals that can “surprise” traders not aware of the bearish reversal pattern.

Let’s see it and study it:

The “Three Push” or “Three Drives to a Top” Pattern is a classic reversal chart pattern.

The main idea is that a trend – once established – has greater odds to continue until the weight of the evidence confirms a reversal.

Lengthy (multiple) negative divergences along with a stand-alone “Three Push” Pattern tilt the balance to the “reversal” side as opposed to trend continuity.

The main idea is that price “pushes” or “thrusts” (swings) up in three roughly identical impulses (I labeled them on the chart above) and then the buyers become tired and lose the supply/demand battle.

The build-up of negative momentum and volume divergences further increase the odds that you’re correctly seeing a Three-Push Pattern develop in real time.

We do not want to buy the retracement (a pro-trend trading tactic) after the third push.

VERY aggressive traders can consider short-selling as price begins to trade DOWN away from the price high of the third push or on the break of a rising trendline or on the break under a key moving average (multiple entry tactics into an aggressive reversal play).

Stops are of course placed above the high and the initial target is roughly the beginning of the first push up.

For LULU, it would be logical to target a collapse toward the 200 day SMA and price pivot at $65.00.

These reversals can be violent and either instantly profitable for those who took the risk to short-sell at the highs… or instantly painful/financially disastrous for those who didn’t see a surprise reversal coming.

The pattern hints at these “surprise” reversals and LULU gives us a key example of how these events develop.

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Corey Rosenbloom, CMT

Afraid to Trade.com

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2 Comments

2 Responses to “Three Push Pattern to a Reversal in Lululemon LULU”

  1. Another Three Push to a Reversal Examle with Dollar General DG | Afraid to Trade.com Blog Says:

    […] posted last week about the “Three Push Pattern in Lululemon LULU” and the […]

  2. Zubair Says:

    Frankly speaking, I haven’t ever done something like this, but it’s obvious that if we really wish to be successful then these patterns are extremely crucial. I like it so much with broker like OctaFX, as they are very special been regulated plus a true ECN for which they have even won the award, so that’s why I feel extremely happy trading with them and it helps me a lot with working, so I can be very comfortable with things.