There are no analyst announcements or other news to account for the signal and the drop of the price below a range that has persisted for eight trading days.
| pps | psar | macd | obv | h-a trend | ma20 | ma50 | ma200 | |||
|---|---|---|---|---|---|---|---|---|---|---|
| LULU $52.15 |
On-balance volume continued in a shallow uptrend, showing a higher low today in the wake of a higher high.
Prices had opened and closed within a narrow corridor of $52.92 to $54.88, with breakouts above and below in intra-day trading.
Today's decline brought the price below the weekly midlevel on the Person's chart for the first time since Nov. 18, the day the bull phase just ended began. Altogether that nine-trading-day bull phase carried the price up by 11.6%.
Person's Table
| pps | pps open | upper pivot | lower pivot | |
|---|---|---|---|---|
| LULU $52.15 | $53.10 dec3 | $56.13 +7.6% | $50.95 -2.3% |
A push to a major swing high of $54.86 on Wednesday brought the price to levels last seen in October 2007, the all-time high that preceded the financial collapse and associated recession. It is from that major point of resistance -- money left on the table when the price headed south three years ago -- that the price rebounded this week.
Reversal Levels
- $54.86, +5.2% (major swing high)
- $52.15 --- You are here.
- $50.55, -3.1% (20-day moving average)
- $45.46, -12.8% (swing low)
I have a bull position in LULU, a bull put spread that I opened Nov. 18 as an earnings play.
In the ideal earnings play, I buy several weeks before the announcement, and hold through the announcement in order to capture any earnings surprise. However, I pay close attention to my principal signals, and when they say "jackrabbit", I tend to run.
The main argument for getting out is moves to bear phase by two of my principal signalers, with the macd -- although still bullish -- declining toward the zero line. Also, the on-balance volume uptrend is shallow and therefore not entirely convincing.
And above all, the price has broken below the sideways trend. Signals can be argued away. Price levels can't.
The case for staying in rests on the fundamentals, which are excellent in the case of LULU, with no debt to speak of, a return on equity of 36% and heavy institutional ownership. Also, the stock has a habit of producing earnings surprises, so to get out now is to fly in the face of a very happy history, for traders on the bull side at least.
I discussed the pro-LULU case in a posting on Nov. 15.
So it's a tough call.
For my account, I hold a bull put spread, short the December $46 put and long the $44 put. I've only attained 65% of my maximum potential profit, so by exiting now I would consider the trade to be less than wholly succesful, since it fell short of my 85% of max profit benchmark.
My inclination at this point is to exit, but I'll be watching the one-day tick chart to see what the price does before making a final decision.
Disclaimer
Tim Bovee, Private Trader tracks the trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
Abbreviations:
- h-a trend - Heikin-Ashi trend.
- obv - On-Balance Volume.
- pps - Person's Proprietary Signal.
- psar - Parabolic Stop and Reverse
- ma20 - 20-day moving average
- ma50 - 50-day moving average
- ma200 - 200-day moving average
- macd - Moving Average Convergence-Divergence
About the glance: The colors indicate the state of each signal.
- Signal Section:
- pps, psar, macd: green for bull mode, red for bear.
- Confirmation Section:
- obv: green for uptrending, red for downtrending.
- h-a trend: green for uptrending, red for downtrending.
- Environment Section:
- ma20, ma50, ma200: green for above the average, red for below the average.
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