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How to Trade Lululemon Athletica After It Reports Earnings

Lululemon Athletica is set to report earnings after the close of trading Tuesday. Let's look at the chart to get an idea of how to trade the stock.

Lululemon Athletica  (LULU)  is on traders’ radar Tuesday as the company gears up to report earnings after the close of trading.

While we’re out of the thick of earnings season, that doesn’t mean it’s completely quiet on the quarterly report front. Lululemon is joined by BlackBerry  (BB)  and Chewy  (CHWY)  on Tuesday evening.

In any regard, the retailer has been in a bit of a funk. At least when it comes to the stock price.

While Lululemon was a big winner during the COVID-19 lockdowns, investors seem more comfortable rotating into the beaten-down retailers like mall stocks.

Even though Lululemon surely has momentum in its business, that momentum has not been present on the chart. Will that change after earnings?

Let’s look at some key levels.

Trading Lululemon

Daily chart of Lululemon stock.

Daily chart of Lululemon stock.

On the chart above, you’ll notice the stock’s powerful run from the March low to the high in early September.

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Since then, Lululemon stock has struggled for upside as it consolidates in a sideways pattern. In that sense, it has been trading more like a mega-cap tech stock, like Amazon  (AMZN)  or Adobe  (ADBE) .

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Over the last few days, Lululemon has reclaimed the 10-day and 21-day moving averages and cleared downtrend resistance (blue line).

That said, we don’t have a super clear setup here. The short-term chart leans bullish, but earnings can be a wild card.

On a bearish reaction, see if Lululemon can hold above $300, a recent support level. This level failed as support earlier in the month, as did range support near $288. Ultimately, the 21-week moving average acted as support.

On a bullish reaction, let’s see if Lululemon stock can clear $320 and the 50-day moving average.

Above the latter puts the 200-day and 100-day moving averages in play. Above that and $350-plus is in play.

So what’s the bottom line? Lululemon is clearly doing well with its business. However, it’s also clear that the stock doesn’t have momentum, because it’s not in a trend. To get back in one, shares need to clear these moving averages and start to put in a series of higher lows. That's what I'm looking for after this week. 

A move below $300 doesn’t help the bulls’ case in the short term.