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. 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.¿