Lululemon (LULU) is set for some bearish stretch marks.
Before Thanksgiving, here in the States, we looked at the charts of LULU and wrote that "LULU looks vulnerable to still further declines. A close below $120 breaks the 200-day average line and a close below $116 breaks a low on the Point and Figure chart. Avoid the long side of LULU."
Prices are down sharply today so I hope you took my advice. LULU has broken to a new low on a different Point and Figure chart so let's visit with the charts again.
In this daily bar chart of LULU, below, we can see that prices rebounded in late November to the underside of the declining 50-day moving average line where they failed. This month prices slide lower and are breaking the rising 200-day moving average line.
The On-Balance-Volume (OBV) line has been neutral since October but looks like it is now turning lower telling us that sellers have become more aggressive.
The Moving Average Convergence Divergence (MACD) oscillator moved to a sell in October and is still in bearish territory.
In this weekly bar chart of LULU, below, we can see that prices are testing and maybe breaking the rising 40-week moving average line.
The weekly OBV line shows more weakness than the daily line. Here, sellers have been more aggressive since late September.
The weekly MACD oscillator crossed to a take profits sell signal in early October and it is moving down to the zero line.
In this Point and Figure chart of LULU, below, we can see the new low for the move down and a downside price target of around $95. Chart support on the weekly bar chart (above) does not show up until we reach $80.
Bottom line strategy: Unfortunately it looks like LULU could decline to around the $80 area in the months ahead. Buy the product and not the stock.
