Key Takeaways
Lululemon Athletica ( LULU ) shares soared on Friday after the activewear retailer reported fiscal third-quarter results that topped analysts' estimates and raised its full-year outlook.
The company guided fiscal 2024 revenue of between $10.45 billion and $10.49 billion, an improvement from its earlier projection of $10.38 billion to $10.48 billion. While revenue in the company’s Americas market grew by just 2% in the third quarter from the prior year, it jumped 33% in the retailer’s international business, boosted by strength in China.
Lululemon shares were up 18% at $407 in midday trading Friday, leading gainers in the S&P 500 and Nasdaq Composite. Even with today's gain, the stock has lost about a fifth of its value since the start of the year due, in part, to problems associated with the company's product assortment .
Below, we take a closer look at Lululemon’s chart and use technical analysis to point out important price levels worth watching out for.
Inverse Head and Shoulders Breakout
Lululemon shares formed an inverse head and shoulders between May and November before breaking out above the pattern’s neckline earlier this week ahead of the company’s quarterly report.
Moreover, the 50-day moving average (MA) has turned upwards toward the 200-day MA, setting the stage for a potential golden cross —a bullish chart signal that indicates the start of a new uptrend.
Let’s identify three important overhead resistance areas where the shares may encounter selling pressure and also highlight a key support level where investors could look for buying opportunities during a pullback .
Important Resistance Areas to Watch
Investors should watch how the price responds to the $389 area. The shares could find resistance in this region near a horizontal line that joins multiple peaks and a trough on the chart between May and October last year.
A decisive close above this area could see the shares make a move toward $419, a location where investors may look to place sell orders near the October 2023 peak and the high price of a gap down candlestick that appeared on the chart in March.
Further bullish price action could drive a rally up to around $468. This area may attract selling pressure near a trendline that connects a range of similar trading levels on the chart from December last year to March.
Key Support Level to Monitor
During periods of profit-taking , it’s worth monitoring the $335 level. Investors may look for buying opportunities in this location near the prominent April swing low , which also forms the neckline of the inverse head and shoulders pattern.
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