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by Koos van der Merwe
Lululemon Athletica discovered the Oprah effect on November 19, 2010. At least that's what the various financial newspapers wrote.
Position: Sell
Koos van der Merwe
Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.
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WEDGE FORMATIONS
That Lulu Of A Lululemon
11/29/10 02:48:45 PMby Koos van der Merwe
Lululemon Athletica discovered the Oprah effect on November 19, 2010. At least that's what the various financial newspapers wrote.
Position: Sell
| A mention of the trendy Vancouver, BC, sporting-goods chain on Oprah Winfrey's TV show sent shares up 5%. Shareholders of the stock have had quite a rise, as we can see on the weekly chart in Figure 1. |
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| FIGURE 1: LULULEMON, WEEKLY |
| Graphic provided by: AdvancedGET. |
| |
| Figure 1 shows how the share price rose from $26.63 on July 27 when it was listed on the Toronto Stock Exchange to a high of $58.77 by October 26, 2007, and then slowly fell along with the market correction until March 2009, when it bottomed at $5.74. From that date it rose strongly in five waves to its present high. The chart suggests that this would have occurred whether or not Oprah had said anything. |
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| FIGURE 2: LULULEMON, DAILY |
| Graphic provided by: AdvancedGET. |
| |
| The daily chart shows how strongly the price has risen, from the low of $5.74 in five waves to a high of $47.80 when it corrected to a low of $33.11 in what looks like a diagonal triangle. It "looks like a diagonal triangle" because the price rather than adhere to its support line broke below it to $33.11, then rose to test it and and broke through it on a gap finding resistance on the intermediary trendline as shown on the chart. Oprah Winfrey's endorsement pushed it through the resistance level of the trendline, to the high of $55.99. Volume was above average for a short while but soon fell below average because of Thanksgiving or because the relative strength index (RSI) is at overbought levels. I believe the latter. By all accounts, the chart is suggesting that the price should now fall to the support level X-Y with the RSI at the 50 levels. Whatever the outcome, and in spite of Oprah Winfrey's endorsement, and even with Xmas approaching, I would not be a buyer of the stock at the moment. |
Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.
| Address: | 3256 West 24th Ave |
| Vancouver, BC | |
| Phone # for sales: | 6042634214 |
| E-mail address: | petroosp@gmail.com |
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