Lululemon in a very Tight Range

Published on Wednesday, 25 January 2012 07:36 Written by Christian Paolinetti

New York, January 25th (TradersHuddle.com) - Shares of Lululemon Athletica Inc. (NASDAQ:LULU) closed the trading session at $62.18 placing the price action in a very tight range, given that calculated support is set at $59.23 and the calculated resistance based on an algorithm of peaks and troughs is set at $62.58

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 price action indicates that both sellers and buyers are materializing very close to each other, which is indicative to a momentum building area, as the stock can resolve by breaking out of the tight range that developed.

Traders wanting to establish a position should place close attention to Lululemon's price action, as any movement outside its predefined range of $59.23 and $62.58 could grab the attention of momentum buyers, looking for a big movement in the price of the stock. Traders need to be aware that tight range resolution works both ways, hence, a move below support at $59.23 could spark above average selling. A tiered approach can be a good way to approach starting a position in Lululemon's, by establishing a starter position while the stock is in the tight range, and then adding to the position as it breaks and closes above resistance.