Lululemon Stock – Ahead of the Disappointment

Bearish   
Ahead of the bearish reversal in Lululemon stock

Even though the stock recouped most of yesterday’s losses, Lululemon still disappointed investors with its Q421 guidance. Despite causing a milder illness, the Omicron variant is nevertheless taking its toll on the company’s sales.

However, shares have been dropping for quite some time now. The stock is down 28% from its $486 all-time high reached in November, 2021. This sharp bearish reversal did not come out of the blue, though. In fact, the Elliott Wave principle warned us about it as early as April 30th, 2021.

Lululemon stock preparing for one last push before correction

Lululemon was hovering slightly under $343 a share when we published this chart nine months ago. From an Elliott Wave standpoint, it was supposed to reach a new record in wave V of the impulse pattern it began back in 2009.

Bears Not Done with Lululemon Stock Yet

Labeled I-II-III-IV-V, this shape suggested a three-wave correction can erase half of Lululemon ‘s value once wave V is over. Where exactly the top was going to form was impossible to predict. However, we thought the bulls would be playing with fire above $450 a share. As it turned out, that wasn’t too far from the truth.

Bearish reversal in place in Lululemon stock

Wave V exceeded wave III in July 2021 and then kept going until it reached $485.83 two months ago. Business was good and the company beat both earnings and revenue estimates in the third quarter. Still, the stock price reversed to the downside.

We cannot tell whether it was simply the market reacting to the Omicron threat two months in advance. All we know is the Wave principle put us ahead of it. LULU fell to an intraday low of $323.50 yesterday, down 33.5% from the top. We don’t think the bears are done yet.

The recent plunge looks like a single wave, not three. Therefore, we believe it is just wave A of a bigger A-B-C zigzag retracement still in progress. Wave B can lift Lululemon to the resistance near $400, before the bears return to drag it below $300 in wave C. A drop to sub-$250 won’t be a huge surprise, either. In our opinion, dip-buyers should think twice before jumping on this one.

Similar Elliott Wave setups occur in the Forex, crypto and commodity markets, as well. Our Elliott Wave Video Course can teach you how to uncover them yourself!

New to Elliott Wave?

Elliott Wave principle offers a completely new understanding of what the nature of the markets is, what drives them and what can be derived from their movement. This course is for those of you, who have been looking for an honest Elliott Wave guide, describing the method’s advantages over other trading tools, but not hiding its weaknesses.

Check Video Course    or     Check our eBook


See our Video Course
or check our eBook

Last year over 60k readers trusted EWM Interactive to help them in their trading decisions.

I’m very happy i discovered your service. Thanks so much and keep up the good work!

- Xavier N.

Just loving your analysis. Thank you so much, really wished you add some more currencies to your list You have a client for life :)

- J. Kotzee

I love the way EWM does business: response times & overall friendly demeanor are fantastic... and the prices are very fair. The trade recommendations read like like they come from a seasoned trader that is used to winning. Couldn't ask for more.

- C. Montgomery

I love the way EWM does business: response times & overall friendly demeanor are fantastic... and the prices are very fair. The trade recommendations read like like they come from a seasoned trader that is used to winning. Couldn't ask for more.

- C. Montgomery

I’m very happy i discovered your service. Thanks so much and keep up the good work!

- C. Montgomery

Just loving your analysis. Thank you so much, really wished you add some more currencies to your list You have a client for life :)

- C. Montgomery