What you need to know
- Lululemon stock rose strongly on Friday as the activewear retailer posted better-than expected earnings and upgraded its full-year forecast.
- This week, the stock broke above the neckline of an inverse pattern formed between May and Novembre.
- Investors should watch important overhead resistance areas on Lululemon's chart around $389, $419, and $468, while also monitoring a key support level near $335.
Lululemon Athletica shares soared Friday, after the activewear retailer announced fiscal third-quarter earnings that exceeded analysts’ expectations and increased its outlook for full-year.
It now expects to achieve a revenue range of between $10.45 and $10.49 Billion in fiscal 2024, compared with its previous projection of $10.38 to $10.48 Billion. Although revenue from the Americas market increased by only 2% over the past year in the third-quarter, international sales grew 33%, driven by the strong performance in China.
Lululemon shares were up 18% at $407 in midday trading Friday, leading gainers in the S&P 500 and Nasdaq Composite. Even after today’s increase, the stock still lost a quarter of its worth since January due to, among other things, problems with the company’s product range.
Here, we examine Lululemon’s price chart in detail and apply technical analysis to identify important levels.
Breakout of the Head and Shoulders in Reverse
Lululemon stock formed a head-and shoulders pattern from May to November, before bursting above its neckline this week in advance of the company’s quarterly report.
Moreover, the 50-day moving average (MA) has turned upwards toward the 200-day MA, setting the stage for a potential golden cross—a bullish chart signal that indicates the start of a new uptrend.
We’ll identify the three key overhead resistance levels where shares could be under selling pressure. Also, we will highlight an important support level at which investors may look to buy during a correction.
The Most Important Areas of Resistance to Watch
Investors will want to watch the response of the market price in the $389 range. This area could be a resistance point for the shares near a line horizontal that connects multiple peaks to a trough in the chart from May through October of last year.
Investors may place their sell orders at this location, which is near the peak of October 2023 and the price high of the gap-down candlestick on the chart from March.
More bullish action in the market could lead to a rally of up to about $468. The area near the trendline may be a place where selling pressure is felt. This line connects similar levels of trading on the chart between December and March.
Monitor Support at the Key Level
It’s important to monitor the $335 mark during periods when profits are being taken. Investors can look to buy near the April swing-low, which is also the neckline for the inverse Head and Shoulders pattern.
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According to the article, as of its date of publication, the author did not possess any of these securities.
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