NEW YORK (TheStreet) -- Vancouver-based fashion designer and retailer Lululemon Athletica (LULU) ripped a few investor portfolios to pieces in the last week. Lulus's stock is trading at $57.61 a share as of this writing, losing more than $12 from a week ago.
I admit I'm not the biggest fan of fashion stock plays. They're fantastic if you get in early, but by definition, that means most investors don't and, subsequently, most don't make oversized profits. That said, it doesn't mean now is the time to sell your shares. In fact, based on a technical analysis reading of the recent sell-off, I think now is the time to get long.
Catching falling knives isn't for the faint of heart, and here's the type of trade I'm most cautious approaching. Once a stock begins to trend lower, they tend to overshoot and fall much further than the situation warrants. Falling prices almost always overshoot because the selling leads to even more selling from panic rather than a logical assessment of new information. In the end, logic rules the day and the market fairly values any given security. In the short-run, emotion is the master.
Understanding just how long "the short-run" can last is the real trick and what I spend my days examining. Despite being an active trader, I don't spend my days buying and selling shares from open to close. Most of my time is dedicated to researching potential opportunities based on historical results with similar criteria.