Lululemon (LULU) beats on EPS and Revs…and guides higher. To the LULU bulls…”Namaste.” (August 31, 2017)
Lululemon ( NASDAQ:LULU ) reports earnings after the bell. It is up 4 percent, which isn’t enough to just reflexively sell into the gap. You don’t want to do that. They beat on revenue and earnings, they beat estimates, and then they also guided higher. Apparently people are feeling a little stressed out and feel like doing a little more yoga. Me, I feel like doing something other than yoga.
Anyway, if we look at the way this stock traded it is a typical deal. I have said this countless times and I actually even heard somebody else say it ages and ages ago; the first move is virtually always wrong. Here, which move do you want to talk about? The little one just before earnings were released or this big, massive move higher, 58.00 all the way up to 62.00 in a very short period of time. And then now the stock has traded down.
What this kind of move tells me is, that tomorrow morning we are likely to see the stock open right around 60.00ish. Because that just seems to happen when stocks do what this one did. A big move higher and then a reversion. Or for that matter, a big move lower and then a reversion. When the post-earnings moves do not continue for a while but instead they reverse, that tends to be an indication that the retail buyers are just basically about done. They will be back first thing at the open, but the institutions are going to be there too, on the other side.
What I would suggest doing is, watch how Lululemon ( NASDAQ:LULU ) trades tomorrow morning. If it starts falling below 60.00 then I think you want to be short this stock, or at least sell into this if you happen to be long. I think that it is a mistake, and I don’t care what the numbers are, I haven’t looked at these numbers before recording this video and I don’t need to. I won’t look at them tonight or tomorrow morning. I have never gotten paid by looking at a P&L (profit and loss) statement or anything else, a 10-Q a 10-K, a 10-whatever.
We are looking at the 60.00 level here. If the stock trades above 60.00 and continues to move then I think you can buy the stock with a stop; I wouldn’t even put it at 59.00, I would put it at 59.50. On the other hand, if the stock starts trading below 60.00 I would short the stock. I wouldn’t even be putting a stop up at 61.00. I would probably put it at 60.50.
I would keep this thing on a very tight leash. Especially if you are trying to go long. Because this stock has already made a heck of a move. It is up 30 percent from bottom to top and that is probably part of the reason why the stock isn’t up even more. This is kind of a classic ‘buy the rumor’, ‘buy the anticipation’, ‘sell the event’. So this could turn out to be a pretty good short, just use 60.00 as your line of demarcation on this stock. Okay? In a word, Namaste.
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