Lululemon Misses on Earnings, the Weekly Chart Still Overbought

Lululemon Athletica Inc. (LULU) has missed the earnings per share (EPS) estimates, on the 11th of June, as the shares remained below the all-time intraday high of $324.76 on 10 June. The stock has fallen to as low as $288.61 on 15 June, remaining above its monthly value level of $281.17.

The athletic clothing and accessories retailer, those forever popular Yoga pants. Stay in shape has been a theme in spite of the COVID-19 pandemic. As the economy reopens, so are fitness centers, which must renew the application to both men and women sports clothing.

Lululemon has a high P/E ratio of 67.28 and does not offer a dividend, according to the trends. The stock is, therefore, for the momentum traders, as its weekly chart is positive but overbought.

The stock closed last week at $297.38, an increase of 28.8% year to date, and in the bull market territory 131.9% above its March 18 low of $128.24. The stock is also 8.4% below its intraday high of $324.76 set on June 10.

The daily chart for Lululemon

Refinitiv XENITH

Lululemon has been at the top of a golden cross since Sept. 1, 2017, when the stock closed at $61.69. A golden cross occurs when the 50-day simple moving average rises above the 200-day simple moving, and indicates that the increase in prices to come.

Follow-up actions of the 50-day simple moving average to the upside until Feb. 27, when it gapped below this key moving average. The gap below its 200-day simple moving average occurred on March 9, leading up to the March 18 low of $128.24.

The ‘ V ‘ shaped recovery from this depression has been offset by the value of the annual level of $169.35 between 12 March and 23 March. The rebound has reached its semiannual pivot at $206.89 April 15. This level has provided a buying opportunity when it was held on 20 April. Its quarterly pivot at $256.73 penetrated and held on 20 May. The monthly pivot for the month of June to $281.17 is now a value level.

The weekly chart for Lululemon

Refinitiv XENITH

The weekly chart for Lululemon is positive but overbought, with its five-week modified moving average of $280.08. The stock is well above its 200-week simple moving average of $129.40, which is the return to the average of the last tested during the week of Sept. 29, 2017, while the average was $57.43.

The 12 x 3 x 3 weekly slow stochastic reading should slide to 86.97 this week, down from 88.94 June 19. The stock is almost reached the 90.00 level, which would have put the stock in a tire parabolic bubble, which is usually an important technical warning.

Trading strategy: Buy Lululemon stock on the weakness of its monthly, quarterly, semiannual and annual value levels at $281.17, $256.73, $206.89, and $169.35, respectively. Reduce the holdings on the strength of its weekly risky level at $339.12.

How to use my value levels and risky levels: The share price closing price on Dec. 31, 2019, has been an entry to my proprietary analytics. Half-yearly and annual, the levels are still on the charts. Each calculation uses the past nine closes in these time horizons.

The second quarter of 2020 the level has been established based on the 31 March, close by, and the level of the month of June has been established on the basis of the May 29 close. New weekly levels are calculated following the end of each week, while new quarterly levels occur at the end of each quarter. Half-yearly levels are updated at mid-year, the levels are set throughout the year.

My theory is that nine years of volatility between the farm are to assume all possible bullish or bearish event for the stock are taken into account. To capture the volatility of stock prices, investors should purchase shares of the weakness of a plan, the value and reduce the holdings of the strength to a risky level. A pivot is a level value of the risk level that was violated in its time horizon. Hubs act as magnets that have a high likelihood to be re-tested prior to their time horizon expires.

How to use 12 x 3 x 3 weekly slow stochastic readings: My choice of using 12 x 3 x 3 weekly slow stochastic readings has been based on the backtesting of many methods of reading the stock prices of the momentum with the objective of finding the combination that resulted in the least number of false signals. I’ve been following the stock market crash of 1987, so I was happy with the results of more than 30 years.

The stochastic reading covers the duration of 12 weeks, high, low, and close for the stock. There is a row of calculation of the difference between the highest and the lowest compared to the farm. These levels are modified for a fast reading and slow reading, and I found that the slow playback will work best.

The stochastic reading scales between 00.00 and 100.00 with readings above 80.00 considered as overbought and readings below 20.00 regarded as oversold. A reading above 90.00 is considered to be a “swell parabolic bubble” of the training, which is usually followed by a decline of 10% to 20% over the next three to five months. A reading below 10.00 is considered to be “too cheap to ignore,” which is usually followed by a gain of 10% to 20% over the next three to five months.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.


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