When it comes to trendsetting winners off and on the price charts, Nike (NYSE:NKE) and Lululemon (NASDAQ:LULU) are sporting the stuff of champions. And for bullish investors looking to wear the color of money, it’s time to put both Nike stock and Lululemon stock on the radar for buying.
Let me explain.
It has been just over three weeks since the market shook itself free from the grips of a menacing December bear market many on Wall Street thought we’d never recover from. But the doom-and-gloom crowd was wrong. And in part, bulls can thank the likes of Nike stock and Lululemon stock for the game-changing performance.
The broader averages have stampeded back into a new bull market. The bullish price action has been supported by confirmation from a powerful market follow-through day and technical leadership in many individual stocks with quality fundamentals affirming the rally is more than just a dead cat bounce.
Among those select stocks demonstrating they’ve got game, retail athletics giant Nike stock and athleisure growth star Lululemon stock have been champions of this effort. And now both are in position on the price charts for buying as part of a structured game plan for bulls.
Retail Athletics Long No. 1: Nike Stock (NKE)
It’s nearly time for bullish investors to “just do it” and buy Nike stock for their portfolios. Since crushing bears with its burly Q4 earnings beat in late December, albeit one quick counter swipe from those same ornery and pessimistic players, NKE shares have rebounded firmly higher.
The action in the Nike stock price has manifested itself in a slightly irregular high-level corrective double-bottom or W-shaped base. With shares finding technical support from prior pattern resistance and a 50% retracement level dating back to 2017’s massive cup-shaped base — NKE’s size and classic power play on the price chart are helping lead the broader averages into a new bull market.
For investors agreeable with Nike stock’s standout performance off and on the price chart and in search of winning long market exposure, my recommendation is to buy shares on a breakout above $81.40. The price trigger marks the high of a healthy handle-shaped consolidation that’s forming just above the base’s mid-pivot and the 62% retracement level.
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If NKE stock rallies above the handle, the expectation is for a quick offensive move that will challenge the base and NKE stock’s all-time high of $85.79 before breaking out again to new highs. In case we’re wrong though, using a 7% to 8% stop loss is a time-tested approach to for bulls playing the game correctly.
Retail Athletics Long No. 2: Lululemon Stock (LULU)
Having a market gorilla like Nike stock in your trading account when it’s flexing its muscle is definitely something to be upbeat about. But if you’re like a lot of investors, making room in the portfolio to buy unbridled growth that’s leading the market higher also makes a good deal of sense. And that’s where athleisure and yoga-centric upstart Lululemon stock fits in quite nicely.
A couple of weeks ago, LULU stock jumped higher following the outfit’s upwardly revised and above-views sales and profit guidance, as well as favorable color from Lululemon stock’s management.
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Now and with shares having relaxed into a healthy resting position on the price chart in a classic corrective cup-with-handle shaped base, it’s nearly time to hit the buy key on Lululemon stock.
As with NKE stock, LULU stock appears to be putting together a nice and constructive handle above the 62% retracement level. In this instance, investors can use a breakout above $152.81 as the basis for buying shares.
From the buy point, a quick leap up would find LULU testing its cup base and all-time-high of $164.79 and well-positioned for reaching even greater heights in 2019. And given that it’s a growth stock don’t think for a second that’s not possible with the help of a supportive market environment.
But ultimately, just in case there’s a downward dog pattern in Lululemon stock’s future that turns more grizzly-looking, I’d strongly suggest using either a money or pattern stop-loss to keep buying this type of breakout a game-winning strategy over the long haul.
Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies, related musings or to ask a question, you can find and follow Chris on Twitter @Options_CAT and StockTwits.
