Lululemon Athletica Inc. (LULU) 9/15/09 PriceWatch Alert Shows Bullish Technicals

Posted: Tuesday, September 15, 2009 8:33 AM EDT
By: Market Intelligence Center Staff

Lululemon Athletica Inc. (NasdaqNM: LULU) closed yesterday at $23.50. So far the stock has hit a 52-week low of $4.33 and 52-week high of $27.99. Lululemon Athletica stock has been showing support around 22.27 and resistance in the 24.11 range. Technical indicators for the stock are Bullish. LULU appears on the Investors Observer Stocks In The News list. LULU reported earnings Thursday morning, posting a second-quarter profit of $9.24 million, or 13 cents per share, on revenue of $97.72 million. Analysts had forecast a profit of 10 cents per share on revenue of $88.20 million. For a hedged play on this stock, look at a Jan '10 20 covered call (QLN AD) for a net debit in the $18.60 area. That is also the break even stock price for this trade. This covered call has a 123 day duration, provides 20.85% downside protection and a 7.53% assigned return rate for a 22.34% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the LULU Jan '11 5 Call (XKQ AA) and selling the Jan '10 20 call (QLN AD) for a $13.60 debit. The trade has a 123 day life and would provide 20.85% downside protection and a 10.29% assigned return rate for a 31.00% annualized return rate (for comparison purposes only). Lululemon Athletica does not pay dividends at this time. [ATU-Seven Summits Research] For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo