Lululemon Athletica Inc. (NASDAQ: LULU)

Lululemon Athletica, Inc., together with its subsidiaries, designs, manufactures, and distributes athletic apparel for women, men, and female youth. The company’s line of apparel and accessories include fitness pants, shorts, tops, and jackets for healthy lifestyle activities, such as yoga, running, and general fitness. Its fitness-related accessories comprise bags, socks, underwear, yoga mats, instructional yoga DVDs, and water bottles. The company sells its products through a chain of corporate-owned and franchise stores; direct to consumer through e-commerce; and a network of wholesale channel, such as yoga studios, health clubs, and fitness centers. As of January 29, 2012, it had 47 stores in Canada, 108 stores in the United States, 18 stores in Australia, and 1 store in New Zealand under the lululemon athletica and ivivva athletica brand names. lululemon athletica inc. was founded in 1998 and is based in Vancouver, Canada.

To review Lululemon’s stock, please take a look at the 1-year chart of LULU (Lululemon Athletic, Inc.) below with my added notations:

1-year chart of LULU (Lululemon Athletic, Inc.)

Over the last (2) months LULU has been consolidating within a small, rectangle pattern. Rectangle patterns form when a stock gets stuck bouncing between a horizontal support and resistance. A minimum of (2) successful tests of the support and (2) successful tests of the resistance will give you the pattern. For LULU, the rectangle pattern has formed a $70 resistance level (red), which was also a prior support, and a $65 support level (navy) that has also previously been resistance.

The Tale of the Tape: LULU has formed a rectangle pattern. The possible long positions on LULU would be either on a pullback to $65, or on a breakout above $70. The ideal short opportunity would be on a break below $65 or at $70.

Would you like assistance in making your TBS trades? If so, email me at christian@yolopub.com and let’s talk about working together one on one!

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!

Good luck!

Christian Tharp, CMT