Thursday, December 9, 2010

LULU Watch

My earnings play lululemon athletica inc. (LULU), the sporting apparel retailer, announced earnings this morning before the bell.

Surprise surprise. The consensus going into the announcement was 24¢. Actual earnings were 36¢.

So the price gapped up by 13.3%, putting my options position at 97% of maximum gain, and I have exited.

ppspsarmacd obvh-a trend ma20ma50ma200
LULU $63.80

I opened a bull position on LULU on Nov. 18, setting out my reasons in a posting several days before entry.

I structured it as a bullish vertical spread composed of December puts, selling the $46 strike and buying the $44, for a credit of $65 per contract, posting about the position that day.

I sold out this morning for a debit of $3 per contract, so the net gain was $63 per contract.

The structure provided maximum risk of $135 per contract. My net gain is a return of 46.6% on risk. Not at all shabby for a 20 calendar-days work.

The price rise put LULU at an all time high. The previous high was set in October 2007.

Reversal Levels
  • $65.06, +2.0% (today's high)
  • $63.80 --- You are here.
  • $60.70, -4.9% (previous high)
  • $52.43, -17.8% (20-day moving average)

My exit was dictated by the logic of the options position I chose. LULU may well move on to new highs -- it's a blue sky stock, after all, with no upside price resistance.

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.

  • 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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