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LULU Continues its Downtrend and may Take a Trip to $37

From the floor of the CME group Dan Passarelli, CEO of Market Taker Mentoring Inc.

From the floor of the CME group Dan Passarelli, CEO of Market Taker Mentoring Inc. discusses how to trade Lululemon (LULU) on its downward trend. LULU has been in a downward trend for months, and broke its strong support level of $40. Passarelli thinks it will fall to $37, which is a six-month low. Passarelli suggests a purely directional trade to $37, hedging off implied volatility and time decay. He suggests buying the Weekly July25 40/37.5 put spread for $1.00, or better. If the stock falls below $37.5 over the next 9 days then the investor will make a profit. It is a low risk, short-term trade. He suggests getting out of the trade if you lose more than $.50. Passarelli suggests selling the put for $2.35 if it drops lower before expiration, cautioning against taking more than 75% profit on a vertical spread.¿

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