After solid earnings, can LULU surmount resistance at $310s?

  • LULU shares are up more than 1.1% to $306 in Friday’s premarket.
  • LuluLemon Athletica offered up quarterly results that impressed Wall Street.
  • MACD gives reason to think rally can continue.

Lululemon Athletica (LULU) stock was up more than 1.1% in Friday’s premarket after the women-focused athleisure purveyor posted an earnings beat for the quarter ending in April after the market closed on Thursday. LULU’s earnings per share (EPS) of $1.48 and revenue of $1.61 billion both beat analyst consensus.

Wall Street had expected $1.43 per share on $1.54 billion in sales. Both revenue and adjusted operating profits grew close to 30% despite management saying they were raising prices. The market particularly liked that Lululemon said price had not affected demand at all.

“As we look into 2023, in terms of pricing, we’re taking modest price increases on about 10% of our assortment,” Lululemon CFO Meghan Frank said on the earnings call. Observers were also impressed that Lululemon was raising its guidance for full-year revenue by about $100 million.

At the open on Friday, LULU stock lost 2% to $296.67 due to a broad market sell-off that resulted from a higher than expected US jobs figure. The market is taking this as a sign that inflation will continue to increase and caused the Federal Reserve to raise interest rates even further.

Lululemon Athletica Stock Forecast: Resistance strong in $310s

The Moving Average Convergence Divergence (MACD) already crossed over into a bullish signal on May 27. If retain LULU price action can this positive sign, then LULU stock will most likely make a run above $320. On Thursday, LULU stock went as high as $320.71 before closing down at $306.93. There is very clearly ample resistance between $310 and $320. This area has seen plenty of volume this year.

A move that overtakes $320, could propel LULU stock up to the supply zone between $360 and $370. This area is the seasonal price target for bulls over the next three months before the fiscal Q2 2023 earnings call.

Bulls need the 9-day moving average to cross over the 21-day moving average and for the MACD to cross above the zero threshold. These will both signal that the rally is still in play. Support is at $292, $284 and $270.

LULU daily chart

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