What’s the opposite of a Downward Dog pattern? Check out this chart of Lululemon ($LULU) for the Coiled Snake pattern. (July 27, 2020)
LULU
I want to look at Lululemon ( NASDAQ: LULU ); the stock has been drifting sideways for the last couple of months. Since the first part of June we have had this stock just trading with about a 330.00 top or so and about a 290.00 low.
This is just the type of basing pattern that we need to move higher. This pattern, though, is a good example of why an active trader would be taking profits. Even if it is from a lower level to where the stock is now they would be taking profits so that they avoid the sideways drift where your money is just sitting in this stock for almost 2 months before it starts to work for you again.
Now, there is nothing wrong with holding through here. In fact, I think there is a lot of merit to a trader just saying, “Hey, you know what? I like this company. I like the way I look in their yoga pants, I think I’m kind of svelte and sexy with those things and others might too. So, therefore, I am going to hold onto this stock,” that type of thing; not.
So there is merit to that. A lot of folks are more actively trading and they don’t like to hold stuff that is just stagnate. Okay, fine there’s more than one way to skin the proverbial cat, I don’t know any of the ways, but that’s just me. The stock here is up again on decent volume; about average volume today but you can see it’s been trading mostly below-average volume during this little run-up.
There hasn’t really been a lot of interest in this stock, a lot of actively in the stock. And that is actually a good thing. We want to see these sideways drifts occur on light volume. Now, we want to see the volume pick up when the stock breaks out on the right side. So that leads me to the analysis for today.
If this stock starts to breakout we definitely have to see higher volume here. We have got to see the stock start to pick up volume and then that makes you a lot more confident in buying the stock to hold it for the next leg up. I think your stop on something like this; you can give it a 10 percent stop, below 300.00, below the 50-day moving average.
Or you can give it a tighter stop under the assumption that Friday’s intraday low is not going to be retested; that’s 313.62 so you would keep a stop, say, right down there. That cuts your risk down almost in half and it keeps you in the trade. If the trade is working and it gets you out a little sooner if this stock turns out to just need more sideways drift. That’s how I would trade Lululemon ( NASDAQ: LULU ).
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