September 24 - LULU Post Trade Analysis

Well that was a fast trade!!!! LULU trade reached its planned goal of about $1 downside within 3 days. This is following the Trade Watch setup on September 14, which put LULU on my radar for a possible short position. In the September 22 post, I mentioned that the trade had been taken at $24.40 with a stop-loss at $25.22.

Today the trade was fully closed out today at $23.05 leading to a $1.35 profit / share.


The move down was also aided by the fact that the markets have been over-bought for days and needed to pull back. The S&P500 closed at 1050 today, down 1% from yesterday and down about 2% since the short position on LULU was initiated.

Although the trade closed at $23.05, LULU continued the decline to end the day at $22.57. It is possible that the stock will trade lower tomorrow as today's action was weak and bearish. However, the trade was executed within the planned range. There should be no regrets even if it moves lower tomorrow.

September 23 - Tricks of the Trade - Part 3

Triangle Breakouts

One strategy is to trade triangle breakouts to the direction of the breakout.
Sometimes a stock which trades on a wide range gets squeezed from top and bottom in a triangular envelope and trades at tight range. Let's look at a historical chart of Mastercard which shows a triangle formation breakout on July 15, 2009:

Now lets fast forward to today and see what would have resulted from going long on the upside breakout of Mastercard from the triangle formation.



A word of caution at this point is that not all of the breakouts lead to such an upside. This was obviously assisted by the rally in the equity markets resulting from hopes of recovery and cheap capital. Sometimes after a breakout, there is downside follow through and the stock whipsaws between breakouts to the upside and downside. In these situations where follow through is weak or indecisive, its is best to put a tight stop-loss and look for other opportunities.

September 22 - LULU Trade

Following my trade watch for Lululemon (LULU), my short-sell trade was taken today at $24.40/share.


I've put a stop-loss order at $25.22 to fully exit the position. My expectation for a downside is a minimum of $1/share profit, however, depending on market strength I will look to revise this target. If the market continues to go strong, even though I believe it's over-bought, I will try to take earlier profits. If the market shows some weakness, I will hold on for more downside profits.

September 14 - Lululemon (LULU) Trade Watch

Before starting this post, I should mention that Lululemon is traded both on the TSX and NASDAQ, under the tickers LLL and LULU respectively. Although in this post I chart and analyze LULU, it can be extended to the ticker traded on TSX.

With the recent earnings news released on September 10th, the stock has had a great run up. However, I'm starting to see a pattern I'm very familiar with - the unsustainable sharp run-up. The result of these patterns is an eventual pull back and I will look to put in a trade to capture the downside. Let's look at a daily one-year chart of LULU:


This pattern has repeated twice in the past couple of months, and possibly setting up for a third time! The pullbacks are very shallow followed by strong up movements, which means if I want to play contrarian, I will have to be in and out fast. As an addition to the volume, the 20 day Average True Range (ATR) has been plotted at the bottom. So at a $1 ATR, I can expect this stock to swing about an average of $1 a day. This way I can get a feel for how far to put stop-losses.

Lets look closer for signs of near-term strength or weakness. Below is today's chart in 5 minute intervals:


Today, LULU climbed with the markets but met with resistance in the afternoon as a triple top formed at around $24. This is bearish in the short-term and I expected a slide from there, however, it finished strong at the day's high. I will look to tomorrow's trading day for a short position entry... especially if we gap up, see market weakness, and come back below resistance levels.

September 11 - Update on GOOG and AAPL trades

Since the initiation of both short positions, the stocks experienced a pull back and continued towards their previous high. However, the Call options that were sold on August 27th have lost more value and indicate a profit.

GOOG DEC 590 calls currently trade at $1.35/share and the AAPL OCT 200 calls trade at $0.40/share. They have both essentially halved in value since as the both stocks have lost quite a bit of steam to the upside.

I am on trade and do not want to keep these positions around earnings as volatility could introduce large moves. Depending on what happens between now and late October when they report, I will look to close out these positions. Right now I have them on close watch.