LuluLemon LULU Squeezes its way Between the Daily EMAs

Shares of Lululemon (LULU) jumped today, but merely continued the “ping-pong” between the 20 and 50 day EMA price pivots.

It also held a key support level from our Fibonacci Grid.  What’s going on?  Let’s see it:

Lululemon LULU

Shares plunged in 2017 from $ 70.00 beneath $ 50.00 but have since recovered.

Strangely enough, shares sit right at the 50% retracement (recovery) of the 2017 decline.

It’s a key level that we’ll use for our future swing/short-term trading.

Simply stated, price is playing bouncy-bounce (ping-pong) between the falling 20 and rising 50 day Exponential Moving Averages (EMAs).

We won’t take a trade until price BREAKS OUT of this yellow zone between the EMAs.

When it does, use it as your trigger to trade the “Departure” from this squeezed level.

A breakout beyond $ 60.00 then $ 62.00 suggest a recapturing of the bull market in motion.

Otherwise, a firm breakdown beneath $ 58.00 suggests we just saw a Dead Cat Bounce and may easily see shares tumble lower toward $ 52.00 or even lower than that.

Plan and trade accordingly.

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Corey Rosenbloom, CMT

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Long Term Fibonacci and Bounce Planning for LuluLemon LULU

Lululemon (LULU) shares face a critical “make or break” support reversal test right now.

What’s the level – based on price and a Fibonacci Grid – and what’s the plan?  Follow along:

We’ll start with the dominant Fibonacci Retracement grid from the 2014 low to the 2016 reversal peak at $ 80.

From there, we see the “Midpoint” at the $ 60.00 per share level and the 61.8% reference line at $ 54.00.

Right now, we’re focusing our attention on the “Final Fib” at 78.6% which is here at $ 46.28.

We’ll see shortly that the Daily Chart highlights a positive momentum divergence at this critical pivot.

Study these levels and use them as reference points to plan price movement “toward” and “away from” them.

Here’s the Daily Chart, complete with gaps in an ongoing downtrend:

Shares collapsed from the $ 80.00 per share high in mid-2016 to the current low under $ 50.00.

Once again, we’re seeing positive momentum divergences like we saw in late 2016 ahead of a gap-up bullish event.

Will something similar happen here?

For now, keep your focus on the $ 50.00 per share level, such that a bullish breakout here could signal a short-term bullish phase into the future.

If not, then use the Weekly Chart above to plan your bearish “downtrend continuation” outcome.

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Corey Rosenbloom, CMT

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Three Push Pattern to a Reversal in Lululemon LULU

The “Three Push” Pattern is one of my absolute favorite price patterns to play.

Lululemon (LULU) – fresh off a bearish earnings surprise – gives us the most recent example of this larger pattern and teh powerful reversals that can “surprise” traders not aware of the bearish reversal pattern.

Let’s see it and study it:

The “Three Push” or “Three Drives to a Top” Pattern is a classic reversal chart pattern.

The main idea is that a trend – once established – has greater odds to continue until the weight of the evidence confirms a reversal.

Lengthy (multiple) negative divergences along with a stand-alone “Three Push” Pattern tilt the balance to the “reversal” side as opposed to trend continuity.

The main idea is that price “pushes” or “thrusts” (swings) up in three roughly identical impulses (I labeled them on the chart above) and then the buyers become tired and lose the supply/demand battle.

The build-up of negative momentum and volume divergences further increase the odds that you’re correctly seeing a Three-Push Pattern develop in real time.

We do not want to buy the retracement (a pro-trend trading tactic) after the third push.

VERY aggressive traders can consider short-selling as price begins to trade DOWN away from the price high of the third push or on the break of a rising trendline or on the break under a key moving average (multiple entry tactics into an aggressive reversal play).

Stops are of course placed above the high and the initial target is roughly the beginning of the first push up.

For LULU, it would be logical to target a collapse toward the 200 day SMA and price pivot at $ 65.00.

These reversals can be violent and either instantly profitable for those who took the risk to short-sell at the highs… or instantly painful/financially disastrous for those who didn’t see a surprise reversal coming.

The pattern hints at these “surprise” reversals and LULU gives us a key example of how these events develop.

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Follow along with members of the Afraid to Trade Premium Membership for real-time updates and additional trade planning.

Corey Rosenbloom, CMT

Afraid to Trade.com

Follow Corey on Twitter: http://twitter.com/afraidtotrade

Corey’s book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).


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