Well, we are currently below that level but fortunately LULU has a rising 50 dma at $42.91 and a trendline shown in blue just above. Those two levels should act as strong support for now and I'd be surprised to see LULU break $45 especially given the fundamentals but if it does I will likely hop out of these calls to buy some lower strike options at the 50 dma. If LULU breaks $40 I'm gone and won't look back for a while.
So why did LULU crack Thursday and Friday so bad? Well I have a few thoughts on this, first of all Cramer the clown came out Friday morning and said sell LULU because it could tank like CROX. Obviously, he just wants to buy back LULU cheaper after he sold early last week. Secondly, there was an extremely bullish push into the close on Wednesday and LULU moved almost 10% in about an hour on huge volume. My guess is that many of those buyers were technical traders that saw the fib bounce and the extreme uptrend that LULU is in. So I bet their stops were hit Friday morning when LULU cratered in the first 15 min. Finally, the entire market got slammed and retail was second only to the mortgage insurers for most pathetic stocks of the week.
I personally couldn't be more bullish on the fundamentals, especially given the strength in the Canadian dollar. Recall the press release a few weeks ago where LULU raised their estimates for this quarter, in part, because of the Canadian dollar's strength (earnings in Canada are now worth more US dollars). Well heres a look at the Canadian dollar over the last few months:
Maybe they should have raised guidance again? As far as I'm concerned buying LULU is a great play on the exploding Canadian dollar, what do you think indigo (currency trading Canuck) and betweenthebars (biggest LULU fan ever)?
Prior posts on LULU here.
Disclosure: I own LULU Dec 60c
5 comments:
I know you guys are all over this stock, looking for growth as they expand into the USA. I can't help but think that consumer spending is going to be less than usual in the near future. Who knows.
As for playing the C$, imo the best way to go is with any number of Canadian oil companies such as SU or IMO. Then you'll be benefiting from both the surge in the C$ but in oil prices too.
Just my 2 Euro cents worth, or 2.9USD (you're quite the bargain there...).
Yeah, I think you're right about the Canadian oil companies being better. Both SU and IMO are at all time highs so it seems like people are on top of that trade already. But those stocks certainly look like screaming buys right now.
On the weak consumer, I agree and it is my biggest concern with LULU. However, they cater to the more affluent consumer and their clothing is turning into a fad. So hopefully they won't be as effected in the early stages of the coming recession and we can see some good gains in LULU until things get really bad in the US.
"Both SU and IMO are at all time highs so it seems like people are on top of that trade already..."
Your software would be all over that.
Lulu is taking a poo poo, retail not for the faint of heart, that is for sure
Yeah, LULU got its back broken in half this week, btb and I definitely took a hit on that thing. But it has been able to hold the $40 area so I still have a little faith. With the C$ so strong I would have expected it to perform better but this market is in panic mode...
It seems done selling off for now, but with the market crashing nothing is off the table.
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