Is Lululemon (LULU) at a good buy point? Is it a deal? (June 12, 2014)
Let’s get to Lululemon ( NASDAQ:LULU ) here. Look at this volume spike, it’s funny, over the course of this chart how many volume spikes do we see and they’re all like really nasty red ones. During this time the stocks basically been going from upper left to lower right, so this is a stock that’s under distribution. Lulu’s ( NASDAQ:LULU ) Chief Financial Officer is leaving so it’s like all these executives are bailing I guess. You’ve got the opposite trade, Twitter’s ( NYSE:TWTR ) going up, Lulu’s ( NASDAQ:LULU ) going down, but the big deal is they’re cutting their guidance. So the stock fell, and there’s a question, I saw it on CNBC today, is this a buying opportunity? The way the market is setting this up I would say no.
When you get this kind of puke fest, let’s look at the intraday; this is a massive, massive selling, 7 million, a bunch of shares, a boatload of shares during the first 5-minutes of trading. There’s the bottom, $37.00, the stock starts trading up, “Oh boy, I’ve got to buy this stock.” Now through the course of the whole day the stocks just fifty-cents higher than the low, why would that be? There’s only one reason why that is and that’s because there’s still a lot of folks, they’re resigning themselves to the fact that even though they held the stock up here because they thought the worst was behind it, not so much, so there’s still a lot of supply up here. Demand, I’ve got to say it’s right around $37.00, 37.00, 37.50 so this stock is in a really, really tight trading range right now.
If you happen to be buying this stock I would set my stop at $36.95, don’t give this any room, because when you look back at the daily chart, there’s no reason the stock can’t go sub 30.00. Look at the weekly chart, this looks like an old chart of Bidu ( NASDAQ:BIDU ), this should be scary to you if you’re long, this should be really scary to you. Look how it’s traded along the 200-day or 40-week moving average, bouncing on it on the way up, coincident with it during this long consolidation period, and then a breakout to the downside. This is a stock that you want to sell into any strength and I’m not the only one seeing this. You don’t have to be a chart genius to look at this and say this is not a stock that you want to buy just yet. So if you’re a day trader you’re buying this downward gap, it’s not working for you. So no matter which way you slice it this is not a stock that you want to own right now. Would I short it? No, I would wait for a move higher then I would short it.
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