Good Evening Traders,
I wanted to do a quick update on a stock that’s been on my radar, and I know many in the room have been watching it hard: Lululemon ( LULU 0.00%↑ ). This is one of the top athletic sportswear companies out there, famous for its expensive yoga pants, and the brand is now at a massive discount. The stock has been hammered, down 52% year-to-date, and while it’s trying to find a bottom, I’m not entirely convinced yet.
Before we get into the chart, the financials actually look pretty solid. The P/E ratio is a low 11.1, which I like. They also have way more assets ($4 billion) than liabilities ($1.76 billion) and they consistently make money, with quarterly profit margins between 15-20%. Last quarter’s 14.69% margin wasn’t too shabby at all.
The stock got a 5.2% pop today after BNP upgraded it from “Sell” to “Neutral”—which isn’t a ringing endorsement, but at least it’s not a “sell” anymore.
The real story here is why it’s been beaten down. They are reportedly losing some of their U.S. customer base because the products are just too expensive. What’s fascinating is their strategy: they’re pulling an “Apple,” refusing to discount the brand and instead positioning themselves as a premium-only product. The CEO even said they plan to raise prices on some items to reinforce that premium status. It’s a bold gamble, and we’ll see if it pays off.
The Chart & My Trade Plan
From a technical perspective, the trade is now at a very clear, defined decision point. The stock has been consolidating for the last six or seven weeks, finding some support on a monthly level at $160.25.
The problem is we are now approaching a massive overhead resistance level.
The “Make it or Break it” Level: $189.00 - $189.55. This is the line in the sand.
Bullish Scenario: If we get acceptance above $189.55, we are off and running. A break here could see the stock continue to push much higher, potentially all the way up into the $300s.
Bearish Scenario: If we bump our head here and fail, that’s all she wrote. A rejection at this level could send the price “much, much lower”.
My Personal Stance: Why I’m Waiting
I’m personally going to wait on this one. I was being greedy and watching for a better price that never came.
The Level I Wanted: I thought about nibbling at the weekly support level of $155.49 / $155.50, but we “never quite got there”. I really wanted that level. If resistance at $189.55 fails, this would be the next “sweet play” I’d look for.
The “Hold Forever” Level: My ultimate greedy target was a sweep of the COVID lows. There is a monthly level down at $121.61. If it ever got down there, my plan was to buy it and “hold on to this thing forever”.
For now, the trade is simple: it’s all about $189.55. Either it breaks and we have a new bull run, or it fails and we hopefully get a chance to buy it at a much better price.
I hope this helps everybody out. I’ll talk to you guys soon.
Ryan Bailey
Vici Trading Solutions
