Trading Idea: What to Expect with Lululemon Breaking Support

Published on Thursday, 12 July 2012 07:00 Written by TradersHuddle Wire

New York, July 12th (TradersHuddle.com) - Shares of Lululemon Athletica Inc. (NASDAQ:LULU) closed the trading session at $55.90 below calculated support at $56.21. The stock broke down technically, raising concerns as the move might trigger additional selling.

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 was trading in a well defined range with support at $56.21 and resistance at $60.95; given that this range was broken traders will be closely monitoring the stock's price action for clues of direction.

From a technical perspective, it can be expected that previous support becomes resistance, as the new range gets defined. However, $56.21 will remain in focus as Lululemon's price action places the stock near the broken support. Traders will be waiting to see if it can bounce back and return to its previous range.

Traders wanting to establish a short position in Lululemon can do so if the stock breaks the intraday low, or if the stock bounces back and selling materializes again at previous support of $56.21. However, if traders want to build a long position, the best entry point to do so is when the price action takes the stock back to calculated support.