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Chart Advisor: When Life Gives You Lululemons

Chart Advisor: When Life Gives You Lululemons

Posted March 28, 2024

From SIA Charts

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Lululemon Athletica Inc

At SIACharts, we compare head-to-head battles of thousands of stocks, commodities, mutual funds and exchange traded funds daily and rank them by who is winning the most in their respective universes. The top 25% are considered the Green Favored Zone, 26-50% make up the Yellow Neutral Zone and the bottom half of each league table is considered the Red Unfavored Zone. SIA Charts relative strength reports also provides investors with an indication of changing and ongoing trends in a stock’s performance relative to its peers.

SIA Charts’ relative strength rankings help investors manage risk by identifying stocks and sectors which are underperforming relative to their peers and/or their benchmarks and should potentially be avoided. Staying away from stocks that are not attracting capital can help investors to avoid areas at higher risk of absolute declines and relative underperformance and to reduce negative event risk.

Lululemon athletica (LULU) reported earnings after the close last Thursday and then plunged 15.8% last Friday. Relative strength analysis had provided indications that the stock was vulnerable heading into the earnings report. LULU dropped out of the green zone into the yellow zone of the SIA NASDAQ 100 Index Report on February 2nd. From then to March 20th, the shares were essentially flat, posting a meager 1.4% gain, while the NASDAQ Composite rose 4.9% over the same period.

Weakening relative strength helped to keep traders from getting sucked in when the stock popped just before the earnings report as well, enabling them to avoid two days of selling pressure which have pushed the shares deep into the Red Unfavored Zone with a drop of 32 positions to 78th place. Trading in lululemon athletica (LULU) shares over the last six months shows how significant breakouts and breakdowns often mirror each other. Back in October, the shares gapped up and broke out to the upside on a spike in volume signaling increased accumulation and the start of a new uptrend. Last week, calling off a false breakout, the shares gapped down on a spike in volume, signaling increased distribution and the start of a new downtrend.


Candlestick Chart

Next potential downside support appears at previous lows at $355.00, followed by $325.00 and $310.00 tests on trend. Initial resistance appears between the $400.00 round number and the bottom of Friday’s gap near $415.00.

A major breakdown is underway in lululemon athletica (LULU) shares. LULU peaked back in January and spent the winter trending downward, Earlier this month, the shares bounced up off of support near $440.00 and even staged a double top breakout. Friday’s selloff called off the false breakout, took out $440.00 and completed a bearish Spread Double Bottom pattern, signaling the start of a new downleg that has already carried the shares back under $400.00.


Point and Figure Chart

Previous column highs and lows suggest potential support may emerge near $384.20, then the $358.35-$365.55 zone and near $327.65. Initial resistance on a bounce appears near the $400.00 round number, then $407.85 based on a 3-box reversal.

With a bearish SMAX score (which is a near-term 1 to 90-day indicator comparing an asset against different equal-weight asset classes) of 5 out of 10, LULU is exhibiting short-term weakness against the asset classes.


Originally posted on 28 March, 2024

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