Is Lululemon Ready for a Rest?

Published on Wednesday, 11 January 2012 07:28 Written by Christopher Lynn

New York, January 11th (TradersHuddle.com) - Shares of Lululemon Athletica Inc. (NASDAQ:LULU) closed the trading day at $59.87 well above its calculated resistance at $49.04, which was calculated from a peak and throughs algorithm, making traders worry about a possible pull back in the stock price.

Lululemon Athletica Inc. (NASDAQ:LULU) designs and retails athletic clothing. The Company produces fitness pants, shorts, tops and jackets for yoga, dance, running, and general fitness.

Lululemon's stock broke out of its defined range that had support at $46.51 and resistance at $49.04. Now the stock is working on developing a new trading range, which should be defined by the high setup after this breakout and its probable support, which could be its previous resistance level $49.04.

From a technical perspective traders should wait to establish a position in Lululemon until a base in the stock develops that can provide good reference points to the upside and most importantly to the downside, for traders have a risk reference point before entering into a position on Lululemon stock.