Lululemon Athletica (LULU) is poised to open sharply higher Thursday morning after a better than expected earnings report last night. LULU is our "Stock of the Day" at Real Money so let's dive into the charts and indicators reminding ourselves that prices are about $9 higher in pre-market activity.
In this daily bar chart of LULU, below, we can see some subtle clues ahead of today's anticipated price strength. In December LULU traded below the rising 200-day moving average line but in March it did not reach the line and in late May LULU was still farther away.
Notice the slight decline in price from the end of April to now? Compare that to the rising On-Balance-Volume (OBV) line from late March - traders have been more aggressive ahead of the earnings' report.
In the bottom panel is the Moving Average Convergence Divergence (MACD) oscillator which is turning up to a fresh go long signal.
In this weekly bar chart of LULU, below, we can see a base pattern in the $60 area back in 2016-2017. Prices doubled and then tripled from the base level. Perhaps we will see LULU go on to rise four-fold from the base?
LULU is above the rising 40-week moving average line. The weekly OBV line has been rising strongly from April 2017, signaling more aggressive buying by investors.
The MACD oscillator narrowed in recent weeks as prices moved sideways but today's price strength could flip the MACD oscillator bullish again.
In this weekly close-only Point and Figure chart of LULU, below, we can see a projected upside price target of $246 which fits in with a four-fold increase from its base.
Bottom line strategy: LULU is anticipated to open higher so the question becomes where to buy it. You could buy the opening if you believe that prices will continue to rise but sometimes there is a pullback with some of the gap being filled.
A pullback is possible because the OBV line suggests that there was buying ahead of the report. Let's give LULU a couple days of hopefully sideways price action before buying or adding to longs. Risk below $165.
