Lululemon, a populur stock, appears to be setting itself up for another leg up. Right now it is showing signs of being in a cup and handle consolidation formation.
Lead up: A large run up from a strong base that ended at the end of of April 2012. This run up measures over 50% in price coinciding with an increase in volume while showing strong relative strength.
Formation: Cup formed beginning in April 2012 and ended in September 2012. The handle began in mid September 2012 and ended June 2012. Stayed consistently above weekly moving average 50 and showed a decrease in volume. Moreover, stayed nicely in the upper half of the cup. The high point of the handle was $78.97, signifying the pivot point.
Entry/Exit Point: I defined an entry point when as $78.97, where a candlestick meets and surpasses the high point of the handle. Still new to using this trading this pattern I took the advice from others and went for a 20% increase in price, making the exit point $94.69.
Warning Signs: The first thing that troubled me about this pattern was that there was not a spike in volume at the bottom of the cup, a sign I like to see. Next, from peak of cup to the bottom was nearly and 55% decline, much greater then a favorable 12%-33% decline. Remember one must wait for confirmation before placing a trade on a stock.
