Trading Nation: Should you get in on Lululemon before earnings? from CNBC.
Lululemon is rallying after posting a big earnings beat.
The yoga apparel company came into its release with big gains already in its pocket. Shares of Lululemon are up 73 percent this year and on track for a sixth positive quarter in a row, a win streak not seen in its 10 years as a public company.
One technician sees even more gains for Lululemon, but his bet depends on one key level.
“It is as bullish as it gets,” Bill Baruch, president of Blue Line Futures, told CNBC’s “Trading Nation” on Thursday. “If you look at the high of 2013 to the low in 2014, you get a range there. To look for how it would get to this unchartered territory, you extend that range above the 2013 high and that brings you to $129.”
Baruch said the $129 level is acting as multiyear resistance. His retracement analysis is based on the 56 percent pullback Lululemon saw from its high in June 2013 to a low in June 2014. A 56 percent move from its June 2013 high brings its share price to $129.
“I happen to be bullish Lulu above $129 and I would buy a retest to $129 but below there I would get concerned for the immediate-term momentum,” he added.
Gina Sanchez, CEO of Chantico Global, said the stock’s swift move has her concerned it can remain at all-time highs.
“The company has really been hitting on all cylinders but the problem is that the stock has been running faster than the company,” Sanchez said Thursday on “Trading Nation.” “As we go into the last quarter, we think that the market is going to be turning more defensive.”
High-momentum stocks such as Lululemon, which are characterized by fast-rising prices with low volatility, tend to underperform when markets turn to defensive names with lower valuations relative to the rest of the market.
“We’re going to see more headwinds in momentum and that’s going to be working against them when they’re already well-priced so that is our caution,” added Sanchez.