While retail stocks have been struggling for much of the past 12 months, one apparel maker bucked that bearish trend and mounted a significant rally in the fourth quarter: Lululemon Athletica . Our recent review of the charts tells us that, unfortunately, the uptrend phase may be over. Since the end of 2023, the S & P 500 has gained around 24% while the Nasdaq 100 has outperformed slightly with a 26% advance. Both of those returns are far more impressive than those for the SPDR S & P Retail ETF (XRT) , which is currently sitting about 8% in that time. The retail space as a whole had a strong run in Q4 2024, however, appearing to close the gap with the major U.S. equity benchmarks. But from mid-December through mid-January, the XRT has given back much of that strong performance from the Q4 bullish phase. Focusing on Lululemon, we can see a major low in early August right around $225. From early August into December, however, everything seemed to change from a technical perspective. The price action went from a clear downtrend phase of lower highs and lower lows to more of a bullish trend with higher highs and higher lows. Price momentum for LULU shifted as well, with the relative strength index (RSI) sitting in a bearish range from January through September of 2024. The indicator usually became oversold on new swing lows, and when the price bounced higher on countertrend rallies, the RSI rarely got above the 60 threshold. Then in October, we saw the entire range of the RSI push higher, representing a shift from a bearish trend phase to a bullish trend phase. Using a Fibonacci framework based on the 2024 downtrend, we can identify potential resistance levels around $337 and $406. The 38.2% level around $337 was reached in early December, but then an earnings win created a gap higher to easily clear that resistance level. LULU then traded right up to the 61.8% retracement level around $406, which ended up being the likely end of the bullish phase. After first testing the $406 resistance level in early December, LULU pulled back before another retest of this upside objective earlier this month. I’ve often said that bullish stocks don’t just trade to resistance, but through resistance. Given LULU’s inability to push above this upside target, we would consider the chart to be bearish until proven otherwise. What’s next for Lululemon given this failed breakout scenario? We can create a new Fibonacci framework using the August low and the December high, generating an initial downside target around $346. This price level would be just below the 50-day moving average, a trend barometer which often serves as short-term support. If that objective would be violated to the downside, we’d be eyeing the 200-day moving average around $312 and the 61.8% retracement level at $300 as further downside targets. We’ve also added the PPO indicator, a classic trend-following indicator, to track the downside progress of this leading apparel stock. The PPO generated a sell signal in mid-December, confirming that the previous uptrend phase was now completed. As long as the PPO indicator remains bearish, there may be further pain in store for holders of Lululemon. -David Keller, CMT marketmisbehavior.com DISCLOSURES: None. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
