Is Lululemon Athletica (LULU) back?
That’s what the bulls are asking on Wednesday with the stock rallying after the apparel retailer's earnings report.
Now working on their fifth straight daily rally, the shares are up more than 23% from last week’s low. From the March low, the shares are up almost 35%.
The company reported its fourth-quarter results after the close on Tuesday, beating on earnings estimates with in-line revenue results. Management also announced a $1 billion buyback plan.
That said, the stock hasn't had an easy road to navigate.
In December, LULU reported solid results and the stock rallied. But just a few weeks later the company preannounced a word of caution on the quarter following the impact of the Covid omicron variant.
That hit the stock, particularly at a time when the entire market was getting rattled. Nike (NKE) stock was struggling, too, and Lululemon’s comments didn’t help matters.
With the fourth quarter out of the way and a solid outlook now in its back pocket, Lululemon is looking for a strong year. Will the stock give long investors what they want?
Trading Lululemon Stock
Chart courtesy of TrendSpider.com
When I look at the daily chart, I’m impressed by the past five days of action. In that span, Lululemon stock (in this order):
- Held the 10-day and 21-day moving averages as support
- Reclaimed and closed above the 50-day
- Rallied more than $50 a share and reclaimed the 10-week moving average and the fourth-quarter low near $366.50
I like Lululemon for the long term. However, that doesn’t mean we can’t acknowledge its short-term hurdles.
Specifically, I’m watching the $375 to $385 area. In this zone, a bevy of measures and levels come into play for Lululemon stock.
They include the 50-week and 200-day moving averages, the weekly VWAP measure and the 50% retracement. Not to mention that this zone was a prior support area.
If the stock can clear this area, then bulls can turn their attention to the $400 to $406 zone. Near the top of that range is the 61.8% retracement.
On the downside, the February high and the gap-fill level sit at roughly $353.50. Bulls would love to see that area hold as support.
Otherwise, the 10-day moving average needs to act as support in order for the short-term bull trend to remain intact.
