Lululemon's V-Shaped Recovery

02/27/25 01:55:12 PM

by Stella Osoba, CMT

With its recent V-shaped recovery is Lululemon (LULU) worth watching right now?

Security: LULU
Position: N/A

Figure 1 is a weekly chart of LULU's share price charting its downtrend and subsequent recovery. In December 2023, LULU was trading at over $500 per share. But soon the stock began to swoon and price began trading lower before plunging below the 50-day moving average in March of 2024.

Figure 1. Weekly chart for LULU.

Graphic provided by: StockCharts.com.

LULU's descent took it from a high of $516.39 in December 2023 to a low of $226.01 in March 2024, a 56% loss. But then in August of that year the downtrend reversed in a V-shaped recovery and price began to rise as quickly as it had fallen. The rise was so quick that the moving averages which are lagging indicators have as yet to respond. Figure 1 shows that the death cross is completed as the stock continues to rise in price. (a death cross is a negative signal showing the slower moving average rising above the faster moving average).

Figure 1 also shows a breakout of price with a strong bullish candle forming, rising above the prior high on 4x the volume of the prior week. This is extremely bullish price activity.

Figure 2 is a daily chart showing around three months of price activity. It shows further bullish action. The gap up in December on strong volume has created a new zone of support. As price has subsequently traded sideways, it is using the area of the gap up as support. Price has dipped three times into the upper area of the zone but has not fallen below the lower line of the gap up. If it does this, the gap is closed and the area will no longer be considered support. Also, note how on the daily chart the 50-day moving average crossed over the 200-day moving average creating a bullish golden cross, the opposite of what has occurred on the weekly chart (Figure 1).

Figure 2. Daily chart for LULU.

Graphic provided by: StockCharts.com.

LULU's price chart is showing positive price action. But it is not historical data that controls. Traders watch price charts carefully because prior positive price action can change suddenly in the other direction. Watch for signs of continued positive price action before making a decision about whether to enter a trade.

Stella Osoba, CMT

Stella Osoba is a trader and financial writer. She is a frequent contributor to "Technical Analysis of Stocks and Commodities" magazine and "Traders.com Advantage" as well as other financial publications.


E-mail address:	stellaosoba@gmail.com

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TECHNICAL ANALYSIS

Lululemon's V-Shaped Recovery

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