I would not chase momentum in this stock and would recommend booking some gains if you were long Lululemon for a year or more.
The stock is not cheap! Its p/e ratio is elevated at 69.52% and its dividend yield is 0.00%. Lululemon has now beaten earnings-per-share estimates in five consecutive quarters.
The Daily Chart for Lululemon
Lululemon has been above a golden cross since July 8 when its 50-day simple moving average rose above its 200-day simple moving average over the past 52 weeks until a breakout occurred on May 20. This was a buy signal came with the price of $373.53 on July 8. This provided the momentum for the rally to the prior all-time intraday high of $417.85 set on August 30.
It’s been a volatile ride for the stock over the last 52 weeks. The stock declined from $387.22 at its December 18 high to its 52-week low of $269 28 on March 5. This was a correction of 30.4%. The rally from this low to its August 30 high of $417.85 totaled 55%. This included a test of its semiannual risky level, now a pivot at $412.98.
The three horizontal lines at the top of the chart are the quarterly, semiannual and weekly pivots at $406.41, $412.98 and $416.44, respectively.
The Weekly Chart for Lululemon
The weekly chart for Lululemon is positive but overbought with the stock above its five-week modified moving average at $398.08. The stock is well above its 200-week simple moving average or reversion to the mean at $219.03. The 12x3x3 weekly slow stochastic reading is 85.43, above the overbought line at 80.00.
Trading Strategy: Buy Lululemon on weakness to its semiannual and quarterly pivots at $412.98 and $406.41. Reduce holdings on strength to this morning’s high of $434.22.