Why Lululemon Stock Could Be In For Long-Term Rebound With A Break Of This Line

Lululemon Athletica, Inc LULU opened Wednesday’s trading session almost 2% lower as the stock was picked up by buyers who caused the stock to trade mostly flat.

On Tuesday, Lululemon closed down 1.54% after Bernstein analyst Aneesha Sherman downgraded the stock from Market Perform to Underperform and lowered the price target from $340 to $290.

Sherman believes slowing consumer spending and waning pent-demand for Lululemon’s apparel will decelerate the company’s growth. The new price target suggests about 6.5% downside for Lululemon... Read more

The drop on Tuesday following the downgrade caused Lululemon to print a higher low, which negated the stock’s downtrend.

If Lululemon continues to bounce on Thursday, the stock could break up from a descending trendline, which could indicate a larger reversal is in the cards.

Want direct analysis? Find me in the BZ Pro lounge! Click here for a free trial.

The Lululemon Chart: Lululemon was working to print an inside bar pattern on Wednesday. The pattern leans slightly bullish in this case because both the mother bar and the inside bar are large green candlesticks.

• If Lululemon closes the trading day near its high-of-day price, higher prices and a break up from the mother bar are likely to occur on Thursday. If the stock runs into sellers who knock Lululemon down to close with an upper wick, lower prices may be in the cards.
• Lululemon has been trading under a descending trendline since Dec. 2, making a fairly consistent series of lower highs and lower lows. When a stock breaks up from a descending trendline it can signal that a longer-term uptrend will take place. Traders will want ot see that happen on hgiher-than-average volume to confirm the patter was recognized.
• If Lululemon breaks down from the inside bar pattern, the downtrend will be back in play and the stock is likely to fall lower over the days that follow.
• Lululemon has resistance above at $315.90 and $329.54 and support below at $304.38 and $288.05.

Read Next: Why Lululemon Is In 'Penalty Box' In Short Term, But Remains One Of The 'Highest Quality Companies' Globally: 3 Analysts On Retailer's Guidance

Photo via Shutterstock.