Athletic apparel issue Lululemon Athletica inc. (
) was in the spotlight this morning, as the company reported on its
second-quarter numbers. For the quarter, net revenue increased 56%
to $152.2 million, while earnings arrived at 30 cents per share.
Analysts had predicted a slimmer profit of just 24 cents per share.
Meanwhile, LULU also raised its fiscal year guidance to earnings
between $1.18 and $1.22 per share -- topping the current consensus
estimate for earnings of $1.15 per share.
Traders seemed pleased by these results, with the shares soaring
some 12.3% so far today to place the stock back above its important
10-week and 20-week trendlines. Despite the stock's technical
fortitude in 2010 (LULU has added 19% year-to-date), the retailer
has been in a bit of a rut lately, with its 10-week and 20-week
trendlines pressuring the shares lower since the end of July.
However, in addition to regaining the support of this
intermediate-term duo, today's positive momentum has also
catapulted LULU back above the $40 level -- a significant point of
both resistance and support to the shares in 2010.
Option players, too, have taken note of LULU today, with roughly
15,000 contracts changing hands by midday -- seven times the
retailer's expected single-session volume of fewer than 2,000
contracts. Calls have been in especially high demand, with 8,655 of
these bullish bets changing hands.
Given LULU's technical feats today, it's no surprise that the
September 40 call has been the day's most popular option. Roughly
2,300 contracts have changed hands on this strike -- the bulk of
which traded at the ask price, indicating they were likely
purchased. While we cannot yet determine whether these calls are,
in fact, fresh positions, with LULU hovering around $40.31, these
calls are right at the money.
For the September series, peak call open interest of nearly, 5,000
contracts can be found at the 38 strike -- which is now comfortably
in the money. Meanwhile, peak put open interest of some 3,000
contracts can be found at the 30 strike. As front-month expiration
draws closer -- it happens after the close next Friday, Sept. 17 --
an unwinding of these out-of-the-money puts could add additional
fuel to LULU's fire.
Meanwhile, with short interest accounting for a lofty 19% of the
stock's total available float, LULU could also benefit from a
potential short-covering rally. In fact, it would take over
for all of these short positions to unwind, at LULU's current pace
of trading. As LULU continues its post-earnings run on the chart, a
fervent rush to cover by the shorts could help to push the shares
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