Stock Chart LULU

Posted by downtowntrader | 6/02/2008 09:54:00 PM | 0 comments »

Stock Chart Analysis LULU

Lululemon Athletica inc. (Public, NASDAQ:LULU)

Often, failed patterns end up being more powerful then the original pattern projected. Part of the logic behind this idea, is that you have the added presence of a group of traders who were caught off guard in addition to the typical traders speculating on the position. LULU is a good example of a possible failed breakout.

LULU is in a precarious position here, as it attempted a breakout from a reverse head and shoulder type base, and quickly fell back under the neckline. This left a group of traders speculating on a breakout from a solid pattern, underwater. They are feeling the pressure as LULU is looking like it might be failing before even reaching their breakeven price. Then you add short sellers looking for a breakdown, and the potential for a sharp pullback is increased. Of course they don't always work out like this, but there is always a chance that failed patterns lead to a squeezing of the group who was caught off guard. This usually leads to handsome profits for the prepared trader.

Good Trading,


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