Lululemon Athletica Inc. was in an up-trend for about three years (dotted line) and then settled in a trading range between $60 (U.S.) and $82 (dashed lines). The subsequent price action was extremely negative because the stock decisively violated the bottom of the trading range to confirm lower targets (A), and because it did so with a large down gap (see chart).
The stock is currently extremely oversold and could have a recovery rally toward around $55, which would fill this gap, but this would merely provide a better exit price. Point & Figure measurements provide targets of $40 and $30.
Monica Rizk is the senior technical analyst for Phases & Cycles Inc.(www.phases-cycles.com). Ron Meisels is a contributor to thewww.NA-marketletter.comwebsite and Tweets at @Ronsbriefs. They may hold shares in companies profiled. Please see the site for a glossary.