Then, a few months ago, Jan. 12, and now charts;

Today this stock dropped about 15% to about $50,50. These are American dollars as this Canadian company only trades in the US.

EW patterns were perfectly clear and whether or not the lack of colours had anything to do with it is neither here nor there. The important take from this, if you did not yet heed this blog’s advice, is that this stock has a lot further to go! There may be a bounce tomorrow (in a wave 4 of 3) but a good target would be about $20.

Notice, by the way, that double tops are often a good place to step aside.

We caught some of these moves in real time, some we missed. Essentially it took longer than we expected for the pattern to develop.

Looking at the short-term chart on the right, there is a very clear, near perfect, a-b-c move upward into a perfect double top. This is a 3-wave structure and therefore corrective in nature. For that to be so there has to be a bigger wave A down in front of it. There is if you put the top  at the very first top AND view the first a-b-c as one single structure, wave A. If correct we are presently in wave C which should unfold in a clearly subdividable 5-wave structure, similar to the first c of A. The whole thing should become a large “flat”.

As a minimum we would look at the level of the 4th wave of previous degree and then the 62% retracement which is at about $33. That is not a great stretch considering the company is very much exposed to China for both its product manufacturing and sales, is trading at wishful p/e of 33 and is seeing more and more competitors entering this space. A sell.

Then – Dec. 2013 – and now charts;

LULU has followed the expected trajectory to a T, hitting a low of almost $36 briefly today. As we pointed out at the time, we are not the least bit confident about the degree of this drop despite the near perfect projection. Today we favour the idea that the recent moves were all part of wave 3 of C and that, therefore, we still need a wave 4 and 5 to complete the entire structure. A drop closer to the $30 level would “look” much better but would require a little more time. To remain bullish longer term the stock should not drop below $30 as this would cause overlap (see also previous blogs). By the way, we are once again amazed at the accuracy that can, from time to time, be gained by using EW principals. The charts can be aligned and put side by side to illustrate the degree of accuracy! Also, practically speaking, you have just saved yourself from a 50% loss.

Then and now charts;

LLL seems to have disappeared so the two charts are not entirely comparable. Nevertheless the gist of the argument was that Lululemon  was a sell almost two years ago. It did not pan out perfectly as the stock stayed in suspension for that entire time, on average, right around the $68 mark. Frustrating, but arguable the correct call.

This has to go lower, as indicated then, $42 would be a minimum and around $30 very likely if not even lower. Presently we are probable in wave 3 of C, so a rebound for wave 4 could occur at any time. Care should be taken when trying to play that move as it is not clear what degree this wave 4 might be, that is 4 of 3 of C or 4 of C.

To remain bullish, the stock should not drop below about $30 as that would cause overlap, at least in the larger count presented in the chart.