Lululemon Waiting for a Bounce

Published on Tuesday, 31 August 2010 05:56 Written by TradersHuddle Staff

New York, August 31st (TradersHuddle.com) - Shares of Lululemon Athletica Inc. (NASDAQ:LULU) closed the trading session at $31.90 well below calculated support at $37.30 placing the stock in oversold territory, as investors and money managers have been moving out of the stock

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 $37.30 and resistance at $39.75, prior to its decline. It was evident how traders went out of the stock, when it broke calculated support sparking the current down draft.

From a technical perspective the Lululemon stock is in severe pain, as the harsh sell-off could place a heavy burden of buyers wanting their money back, generating a price dynamic where buyers will become sellers when a bounce materializes. It can be expected that previous support becomes resistance, as a new range gets defined, therefore the maximum move for the stock should be calculated to return to previous support at $37.30. Traders wanting to establish a long position in Lululemonto play an oversold bounce should consider waiting for evidence of buying at a specified area to use it as a pivot placing stop losses.