In short, to answer the question above, yes. LULU seems to be in a cup and handle pattern. Further examining this chart, the cup was the ‘rounded bottom’ and the handle is the downtrend since September. The chart below displays the pattern. The next chart includes a Fibonacci retracement of the ‘cup.’ LULU bounced off the 50% retracement level and has since rallied nearly 10% to current levels. The question remains, where will LULU trade to after this pattern.
The analyst community seems to be taking the bullish side of the pattern, for maybe the fundamentals will propel the stock to the upside and resolve the chart. CS, Credit Suisse, recently raised their price target to $86, but Nomura, on the other hand, kept LULU at a hold, but raised their price target to $67. LULU trades at about 44x trailing twelve month earnings. Other athletic apparel stocks, like UA and NKE, trade for 50x and 21x respectively…a wide range. With respect to PE multiples, the analyst community is expecting a PE of 29x for next fiscal year. Of the 23 analysts that cover the stock, they, on average, expect LULU to trade at $82.00/share…$10 or about 14% from current levels.
LULU will be a stock to watch, for its volatility represents opportunity for traders. With respect to the aforementioned volatility, LULU has weekly IV (implied volatility) of about 43% or an implied one standard deviation move of plus or minus $3.30.
Feel free to e-mail any comments, feedback, suggestions, or general inquiries to… Author salernoma@mx.lakeforest.edu
