DailyPlay – Opening Trade (LULU) Closing Trade (COST) – August 9, 2024

Closing Trade

• COST – 32.60% loss: Sell to Close 1 Contract (or 100% of your Contracts) Sept 20th $800/$750 Put Vertical Spreads @ $7.40 Credit. DailyPlay Portfolio:  By Closing this Contract, we will receive $740. We initially opened this Contract on Aug 2 @ $10.98 Debit. Our loss, therefore is $358.

LULU Bullish Opening Trade Signal

Investment Rationale

The recent selloff has pushed Lululemon Athletica Inc. (LULU) to a new multi-year low, but now it looks oversold and ready for a bounce. The charts confirm that sellers are exhausted, while the fundamentals are more than compelling. With improving technical and fundamental outlooks, LULU presents an attractive risk to reward for long exposure.

Technical Analysis

LULU’s 50% decline has pushed the stock’s price to its 2020 levels and has reached it’s most oversold condition in its stock history. This suggests that sellers are exhausted and now has the potential to reverse higher. The initial upside target would be the bottom of its trading range from May 2020 to July 2024 of $280. 

LULU – Daily

Fundamental Analysis

Trading now at 15.7x forward earnings a 24% discount to its industry despite expecting to grow EPS inline with its industry of 10-11% and expecting revenue growth that is double its industry. Additionally, LULU operates more efficiently than its peers with a 16% net margins vs 11.5% industry average. This puts LULU in a rare classification of strong growth retailer that trades at a significant discount to the market and its peers and provides an attractive investment opportunity. 

Trade Details

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish Credit Spread

Details: Sell to Open 2 LULU Sept 20th $240/$220 Put Vertical Spreads $7.67 Credit per Contract.

Total Risk: This trade has a max risk of $2,466 (2 Contracts x $1,233) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $1,233 to select the # contracts for your portfolio.

Counter Trend Signal: This is a bullish trade on a stock that is expected to bounce higher off support.

1M/6M Trends: Bearish/Bearish

Relative Strength: 1/10

OptionsPlay Score: 89

Stop Loss: @ $15.34 Debit (100% loss to the value of premium)

View LULU Trade

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that whenever there is a multi-leg option strategy, it should be entered as a single trade. 

PLEASE NOTE that these prices are based on Thursday’s closing prices. Should the underlying move significantly during the pre-market hours, we will likely adjust the strikes and prices to reflect a more accurate trade entry. 

View LULU Trade