Lululemon Athletica Inc. (LULU) 10/29/09 PriceWatch Alert Support At Around $22.98

Posted: Thursday, October 29, 2009 8:12 AM EDT
By: Market Intelligence Center Staff

Lululemon Athletica Inc. (NasdaqNM: LULU) closed yesterday at $25.11. So far the stock has hit a 52-week low of $4.33 and 52-week high of $27.88. Lululemon Athletica stock has been showing support around 22.98 and resistance in the 28.94 range. Technical indicators for the stock are Bullish. LULU appears on the Investors Observer Stocks In The News list. LULU raised its third quarter guidance on Tuesday and said it sees same-store sales rising in the quarter instead of remaining flat as previously expected. For a hedged play on this stock, look at a Mar '10 20 covered call (QLN CD) for a net debit in the $18.71 area. That is also the break even stock price for this trade. This covered call has a 142 day duration, provides 25.49% downside protection and a 6.89% assigned return rate for a 17.72% 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 7.50 Call (XKQ AU) and selling the Mar '10 20 call (QLN CD) for a $12.10 debit. The trade has a 142 day life and would provide 21.94% downside protection and a 3.31% assigned return rate for an 8.00% annualized return rate (for comparison purposes only). Lululemon Athletica does not pay dividends at this time. [THA-Seven Summits Research]