lululemon athletica Inc. (LULU) was last reviewed at the end of March where I wrote "Many times before an upside breakout occurs from an earnings "surprise" you can find some positive clues. Looking at LULU today I have not found a pattern of accumulation. While surprises do happen on Wall Street, I am not that confident to follow the strength this morning on LULU. I could be missing a rally to $100 but I would probably have to risk to $77 and that does not give me an attractive risk/reward ratio." As things turned out LULU gapped to the upside and rallied to $100 and then another $40 after that - I missed the boat and a big payday for readers. Let's look at the charts again this morning and see if I can get it right this time.
In this updated daily bar chart of LULU, below, we can see a bullish alignment of our favorite technical indicators. Prices are in a uptrend with LULU above the rising 50-day moving average line and the bullish 200-day line. The daily On-Balance-Volume (OBV) line has been steady for the past three months and is very close to making a high for the move up. A new high for the OBV line would confirm the price strength and tell us that buyers of LULU are behaving more aggressively with heavier volume being transacted on days when LULU has closed higher on the day. The daily Moving Average Convergence Divergence (MACD) oscillator turned up in early August to a fresh outright go long signal.
In this updated weekly bar chart of LULU, we can see a bullish picture. Prices are in an uptrend and above the rising 40-week moving average line. The weekly OBV line has been in an uptrend since May 2017 and tells us that buyers have been strong accumulators of shares for several months. The two moving averages that make up the weekly MACD oscillator have been on top of each other but now look to be turning upwards to a fresh buy signal.
In this Point and Figure chart of LULU, below, we can see LULU in an uptrend with a possible price target of $158.70. A new high trade at $140.77 will be positive and a decline to $133.94 will be slightly bearish.
Bottom line strategy: LULU might suffer a short-term shake-out or dip but the overall technical picture suggests we could see higher prices in the weeks and months ahead. The $160 area is our upside price target and longs should risk below $125 for traders and below $119 for investors.
