Trading Idea: Momentum Building in Lululemon

Published on Monday, 18 February 2013 07:56 Written by TradersHuddle Wire

New York, February 18th (TradersHuddle.com) - Shares of Lululemon Athletica Inc. (NASDAQ:LULU) closed the trading session at $67.85 with its price action in a very tight range, given that calculated support is set at $66.65 and the calculated resistance is set at $70.20.

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. This signals an area where momentum is building, since the stock can resolve by breaking out of the developing tight range.

Traders wanting to establish a position should pay close attention to Lululemon's price action, as any movement outside its predefined range of $66.65 and $70.20 could grasp the attention of momentum buyers that look 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 could spark above the average selling. A tiered approach could be the best way to start a position; enter into it while the stock is in the tight range, and then add to this position as it breaks and closes above resistance.