Lululemon Athletica Inc. (LULU) 10/30/09 PriceWatch Alert With Support Around $24.71

Posted: Friday, October 30, 2009 8:06 AM EDT
By: Market Intelligence Center Staff

Lululemon Athletica Inc. (NasdaqNM: LULU) closed yesterday at $26.24. So far the stock has hit a 52-week low of $4.33 and 52-week high of $26.76. Lululemon Athletica stock has been showing support around 24.71 and resistance in the 27.53 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 Jun '10 25 covered call (QLN FE) for a net debit in the $21.44 area. That is also the break even stock price for this trade. This covered call has a 232 day duration, provides 18.29% downside protection and a 16.60% assigned return rate for a 26.12% 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 12.50 Call (XKQ AV) and selling the Jun '10 25 call (QLN FE) for a $9.80 debit. The trade has a 232 day life and would provide 15.02% downside protection and a 27.55% assigned return rate for a 43.00% annualized return rate (for comparison purposes only). Lululemon Athletica does not pay dividends at this time. [FBB-Seven Summits Research]