While retail stocks have struggled for much of the past 12 months, one apparel maker has bucked the trend and posted big gains in the fourth quarter: Lululemon Athletica. Our recent review of the charts tells us that, unfortunately, the uptrend phase may be over. The S&P 500 is up about 24% since the end of 2023, while the Nasdaq 100 is up 26%, slightly outperforming the broader market. Both returns are much higher than those of the SPDR S&P Retail ETF (XRT), which currently returns about 8%. However, the overall retail sector performed strongly in the fourth quarter of 2024, appearing to narrow the gap with major U.S. equity benchmarks. But from mid-December to mid-January, XRT has given up much of its strong performance during the fourth quarter bull phase. Focusing on Lululemon, we can see that the major low was around $225 in early August. However, from early August to December, everything seemed to change from a technical perspective. Price action changes from a clear downtrend phase with lower highs and lower lows to a bullish trend with higher highs and higher lows. LULU’s price momentum also changed, with the relative strength index (RSI) in bearish territory from January to September 2024. On rebounds higher, the RSI rarely crosses the 60 threshold. Then in October, we saw the entire range of the RSI push higher, representing a shift from a bearish to a bullish trend phase. Using a Fibonacci framework based on the 2024 downtrend, we can identify potential resistance levels near $337 and $406. The 38.2% level was touched around $337 in early December, but a subsequent earnings victory created a higher gap that easily broke above this resistance. LULU then rose to the 61.8% retracement level near $406, which could ultimately be the end of the bullish phase. After first testing resistance at $406 in early December, LULU pulled back before retesting this upside target again earlier this month. I often say that bullish stocks not only trade at resistance levels, they also trade through resistance levels. Given LULU’s inability to break above this upside target, we will consider the chart bearish until proven otherwise. Given this failed breakthrough, what’s next for Lululemon? We can create a new Fibonacci framework using the August low and December high, yielding an initial downside target around $346. This price level will be just below the 50-day moving average, a trend barometer that usually acts as short-term support. If this target is violated on the downside, we would view the 200-day moving average near $312 and the 61.8% retracement of $300 as further downside targets. We’ve also added the PPO indicator, a classic trend-following indicator to track the downside progress of this leading apparel stock. PPO issued a sell signal in mid-December, confirming that the previous uptrend phase was now complete. As long as PPO indicators remain bearish, Lululemon holders may face further pain. -David Keller, CMT marketmisbehavior.com Disclosure: None. All opinions expressed by CNBC Pro contributors are theirs alone and do not reflect the views of CNBC, NBC UNIVERSAL, its parent company or affiliates, and may have been previously disseminated by them on television, radio, online or other media . The above is subject to our Terms and Conditions and Privacy Policy. This content is for informational purposes only and does not constitute financial, investment, tax or legal advice or a recommendation to purchase any security or other financial asset. The content is general in nature and does not reflect any individual’s unique personal circumstances. The above may not apply to your particular situation. Before making any financial decisions, you should strongly consider seeking advice from your own financial or investment advisor. Click here to view the complete disclaimer.
Charts show the once best-performing retail stock is now showing signs of weakness. The following are the levels worth paying attention to | Real Time Headlines
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