Skip to main content

Lululemon After Earnings Jump: Do Charts Say Buy or Sell?

Lululemon is jumping to all-time highs after better-than-expected earnings. Here's how to navigate the stock from here.

Lululemon Athletica  (LULU)  shares are ripping higher on Thursday. 

Fueling the move higher is the earnings, which initially sent the stock higher by 14% in early trading. Even off the morning highs, the stock is still up double digits percent.

The ride, however, has not been easy ride for Lululemon. After pushing to all-time highs on Aug. 30, the stock double-topped around $415 and began to retreat. Little did investors know that the stock was about to embark on a six-day losing streak.

Amid that decline, the shares fell over 8%. It’s worth pointing out that Nike  (NKE) , American Eagle Outfitters  (AEO)  and other retailers also fell for six straight sessions. The SPDR S&P Retail ETF  (XRT)  fell in five of those six days as well.

In other words, it wasn’t the best stretch for the group.

In regard Lululemon, though, the top- and bottom-line beat was enough to fuel a move to new all-time highs.

A strong outlook helped as well. As the shares fade a bit from Thursday’s high, where can investors expect this name to go?

American Eagle is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells AEO? Learn more now.

Trading Lululemon Stock

Daily chart of Lululemon stock.

Daily chart of Lululemon stock.

On the chart above, you’ll notice the painful skid that Lululemon stock went on ahead of its earnings report.

The shares not only fell from new highs but also sliced through several key measures. That includes the 10-day, 21-day and 50-day moving averages, as well as the $387 level.

Now with the stock gapping above all these marks — along with $415 resistance and the former all-time high at $417.85 — bulls have a new range to navigate.

On the downside, they want to see the $415 to $418 area hold as support. To see former resistance swing to support is a bullish sign and would pave the way for more potential upside.

If this area fails, look for the 10-day and 21-day moving averages to step in as support.

On the upside, keep an eye on $434.22, the new high. If Lululemon stock can push above that mark, it puts the 161.8% extension from the current range in play, up near $443.50.

The bottom line is pretty straightforward: Either look to buy the dip into former resistance or look for a squeeze over the post-earnings high.