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Buy the Dip in Lululemon Stock or Stay Away? Here's What the Chart Says

Lululemon stock is falling hard after a disappointing fourth-quarter update. Here are the key levels to know now.

Shares of Lululemon Athletica  (LULU) - Get Lululemon Athletica Inc Report are off the lows of the day, but are still down significantly on Monday.

The stock is down 6% after the company warned about its fourth-quarter results.

That’s just ahead of the earnings season that’s about to kick off with the banks later this week, even though Lululemon won’t report until March.

Of course, it doesn't help that Lululemon made the announcement on a day that comes with more selling pressure in the overall market.

Lululemon isn't doing Nike  (NKE) - Get NIKE, Inc. Class B Report any favors either, which is down almost 5% on the day. 

Investors may consider it payback after Nike sued Lululemon last week over a patent infringement. 

In any regard, Lululemon said that revenue would likely come in at the lower end of its previously forecasted range of $2.15 billion to $2.165 billion. Adjusted profits would likely be between $3.25 to $3.40 a share.

Coming into the week, Lululemon stock was down about 27% from the highs. Is today’s selloff overkill?

Trading Lululemon Stock

Weekly chart of Lululemon stock.

Weekly chart of Lululemon stock.

The silver lining is that investors are buying the dip, with Lululemon being bid off the lows.

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Unfortunately though, Lululemon stock is plunging below key weekly support. Additionally, its selloff has landed it no man’s land, with no meaningful level of support nearby.

There’s no meaningful downside extension nearby, nor is there divergence on the RSI reading. In short, there’s not much for bulls to go on.

For many traders, that makes Lululemon stock a no-touch and if that’s your verdict, you won’t get an argument from me.

However, those that feel they need to trade Lululemon — or perhaps came into the week long and are looking for ideas on how to pivot — here are the levels I’m watching now.

On the downside, we have a measurable low at $323.50. If the stock breaks below that mark, it could open the door down to the $300 area.

Not only has the $295 to $300 zone been support for the stock in the past, but the 50% retracement comes into play near $307.

On the upside, keep an eye on Monday’s high at $342.34. If Lululemon stock can clear that mark (and stay above it), then it could put the gap-fill in play up near $354.

That could put another measure in play too: The key weekly support marks that failed on Monday.

That's the 21-week moving average and the weekly VWAP measure.

Above that and the December low is on the table near $367, along with the 50-week moving average.