Yogawear purveyor Lululemon (LULU) has been quite the growth story in recent years and at the same time a stock volatile enough to satisfy every trader’s cravings. Since 2011 the stock is up well over 100% and in 2012 alone it is higher by roughly 50%, outperforming most in its industry.
Yesterday, Thursday December 6th, the company announced third quarter earnings that beat expectations and it also raised its guidance for the full year. At one point after the news broke the stock traded as low as $63.60, down 7.30% but that quickly changed as the official trading session began at 9:30 AM ET. What at first looked like a day that could break the stock, ended up in a big intraday turnaround, leaving the stock higher by some 7.25% on the day.
The daily candle that formed as a result of the intraday turnaround is a classic hammer formation whereby prices at the lows of the day were rejected so strongly that the stock not only left a long tail behind but also closed right at its highs for the day.
Yesterday’s price rejection also came near the bottom of a trading range (oval shaded area) that has been in place since the end of August. Volume too was extraordinarily heavy at over 10 million shares traded on the day. On the chart below note how the stock’s sharp intraday turnaround managed to push it back above its 50, 100 and 200 day moving averages and right back to its November highs which have held as resistance since mid October.
Lastly and equally importantly, on November 15th the stock found support at the 50% Fibonacci retracement level of the August to September rally…yesterday’s early morning sell-off again held that support level. The aforementioned resistance line (red) in the stock can currently also be seen in some of the broader stock market indices.
Given yesterday’s massive upside turnaround should have given the stock enough boost for follow-through buying in coming days. Participation by the broader market could further boost the stock’s performance into year-end as momentum funds and performance chasers jump on the band wagon. The stock could target the September highs near $79.00.
