Lululemon (LULU) — buy or sell?

Lululemon ( NASDAQ:LULU ) was in the news, it’s been in the financial news lately, basically because it looks like it’s forming a bottom, they’ve got a new CEO. I noticed Karen Finerman on “Fast Money” the other night was suggesting, and this happens all the time, “Hey, if you’re the new CEO throw everything into the corridor, just get all the dirty crap out of there, throw the baby out with the bathwater, just dump every ugly thing that’s happening in the company into that first quarter, because then you’re setting yourself up for success by doing that.” It’s like, “Things are as bad as they’re going to get, its only going to get better, so buy this stock.” That’s kind of what has been suggested, and the price action has been pretty bullish, right? But don’t just go rush out and buy this thing without at least considering the technicals. By the way, a fundamental development like amazing earnings, or a patent win, or an FDA approval, or something like that will trump the best technical chart; just so you know that, it’s really important that you understand that.

So when I’m talking about this, I’m looking at this at this chart right now, I wouldn’t touch this. A nice uptrend, sideways consolidation, volatility squeeze, this is a weekly chart by the way, volatility squeeze, really tight trading range, and then, Boom! This thing gets puked out to the downside, it’s formed this gap, and if it’s not going to fill the gap, this looks like Baidu ( NASDAQ:BIDU ) did a couple of years ago, just really looking weak. But I’m not saying this is going to go lower, in fact the stochastics here are showing some decent upside momentum, short-term, this is on the weekly chart, this looks kind of scary here. By the way, I’m a big fan of Lululemon ( NASDAQ:LULU ), not really the stock right now, but I like their stuff, I wear them all the time.

So here’s the thing though, where the stock is right now, it’s still below this gap; it needs to start filling this gap. My bet is if the stock starts chewing into this level, it’s going to keep going. I would just be careful with this, don’t be quite as enthusiastic about this stock as other people are. I do think its going higher rather than lower, but there’s a heck of a lot of pain in this chart. Everybody who bought there is hoping to get their money back, there’s nobody that’s bought here, so you’ve got a lot of supply overhead with Lululemon ( NASDAQ:LULU ); watch and see how the stock performs this Monday; watch and see how it performs around earnings. Short-term I would say it’s probably going to get more upside, but it’s not a perfect chart pattern, so just be careful on this.