Lululemon LULU Stretches to Breakout with Trade Targets
Yoga active wear company Lululemon (LULU) reported better than expected quarterly revenue this morning, and buyers bounced the stock higher in a breakout event.
Let’s chart the breakout, update our charts, pinpoint key target levels, and plan a strategy from here.
We’ll start with the Daily Chart breakout as a reference:
Shares performed an upward-facing dog rally (that’s a yoga term!) from the October low to the April peak.
During this time, price roughly doubled as buyers flexed their muscles.
However, most of 2015 saw a sideways stretch bind price in a trading range between $60 and $70.
The most recent patter was a small wedge that created a positive momentum divergence into the key support level slightly beneath $60.00 per share.
The reversal candles at support with divergences formed an aggressive – and profitable – bullish bounce setup.
Today we see the earnings news gap the stock above the upper trendline to trigger a breakout impulse.
The simple target would be $70.00 per share which is the prior high.
We can turn now to the Weekly Chart for a broader perspective and better price targeting:
Shares spent 2012 and 2013 within a wide trading range that broke powerfully to the downside in early 2014.
Price tumbled in half during the sell-off, only to end mid-2014 with a lengthy positive divergence.
A breakout in late 2015 carried price to the current level in early 2015.
Ultimately, we’re monitoring the new uptrend (weekly chart) in the context of a sideways trading range (daily chart).
If buyers continue showing their strength, then we can trade up toward $70.00’s resistance high.
If buyers then take shares in another breakout above $70.00’s high, then we can play potentially higher at least toward the $75.00 per share level into the remainder of 2015.
Whatever indicators you’re using – or whatever yoga stretches you may be practicing – be sure to build your trading strategies around these levels and the bullish price trend in motion.
Follow along with members of the Afraid to Trade Premium Membership for real-time updates and additional trade planning.
Corey Rosenbloom, CMT
Afraid to Trade.com
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Corey’s book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).
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