LULU faces weak demand and poor financials; stock expected to remain flat or decline.

All right. Right. And so let's move to your next one here because I'm excited to hear how you're looking at Lululemon right now. I mean, really struggling. Investors were really hoping for some strong quarterly results from this company.

They did not come. The turnaround isn't happening. They're citing, you know, more uh pressure and bad press on social media. They're having inconsistent reactions to their product launches.

A lot of issues here, but a new CEO in play, so there is the potential for a strategy change. So, how are you looking at Lulu?

Lulu is super interesting to me. In fact, when I look at how much it's falling from, I'm thinking to myself, how come I didn't have puts on this thing sooner? But, you know, they're a clothing retailer or premium athletic wear company?

And you got to think about it in this economy. Is premium athletic wear the number one thing you're thinking about when gas prices is high, food price is high, everyone's charging you 3% to use your credit card?

I shouldn't say everyone, but it feels like that. Are you really top of mind thinking about athletic wear, premium athletic wear? Second thing is you also have competition coming from them from other companies.

Aloe is starting to gain ground in other athleisure wear companies. And then the third thing you have to ask yourself is where's the growth going to come from? Because how many pairs of nice yoga pants or nice workout gear do you really need?

And so I I don't understand. I don't know that I see where the growth is going to come from, which is why the stock has been in a decline.

They did get a new CEO. I think it's kind of funny that the new CEO is the priest Nike executive, and Nike is having one of the worst uh years with this stock that it's had in a long time.

The stock is down in the toilet. You know, that's the best way to put it. And they're risking getting delisted from the S&P 500. So, no disrespect to the new CEO, but that doesn't give me a lot of faith in the turnaround story here.

And then when you look at the numbers, the numbers tell the story. Q2 revenue fell 4%, comparable sales fell 9%, and then when you look at the Americas, revenue declined 8% and then comparable sales fell 12%.

I know that's a lot of numbers, but all I want you to understand is they're going in the wrong direction. All the numbers say fail fail fail and then their Q2 margin rose 200 basis point but most of that was from a tariff refund not from the ordinary business doing well.

So this stock just doesn't get my faith as far as a turnaround stories in the near term. I think it's going to stay flat or even go lower.

Yeah, Lulu is the 10th worst performer in the S&P 500 uh so far this year. Nike also one of the worst performers and as you highlighted removed from the S&P 100. So as we look at this I mean you can just see the decline here.

I mean we're down more than 50% year to date but I I do see two converging lines Rick. So walk me through what you're seeing here in the technicals.

Yeah you know no disrespect men either but Nike to Lulu is really out of the frying pan into the fire. A very difficult situation right now. Increasingly a lack of loyalty among consumers as well particularly younger consumers.

But what we can see with our two lines was this symmetrical triangle shape that we saw before earnings. As I often say, these low volatility environments can often be a precursor to high volatility when the breakout eventually happens.

Uh unfortunately for the bulls, it came from the down to the downside in this case here. So our gap open at 118. Our pre- gap low point was this red line right here near about 104.

That's our new high that we had after our breakdown. Our low came in at 9755. So, those are the relevant areas to watch in terms of our extreme price activity. Moving averages have not quite caught up with our price action yet.

Here, our 5-day EMA in dark blue comes in at 10378. RSI moving lower below the 50 midline. 30 is the threshold for the oversold area. Look for a breakdown below that level for potential acceleration to the downside.

Meanwhile, our volume profile shows something that is again not really a great piece of news for bulls. Our point of control, our heaviest trading area of all come is at 11849.

So, we have fallen below that heavy volume at low levels often is a signifier that an important low point has been reached. So, uh uh this plunge below that level suggests uh there could be quite a few trap bulls in this area here.

So, beware of any rallies that could result in a selling activity trying to get out of these positions.

All right, Jason, you already said that you don't really see any catalysts to move this name higher. So, I'm I'm guessing your strategy is bearish, but walk us through your trade type.

Absolutely. So, the the strategy is bearish, but this is where you have to be careful as a options trader or as a trader, period. You don't want to just pile into the bare side because the stock has been beaten down so much and then we had this huge gap down over earnings.

So I think the wrong thing to do is to say I just think it can go lower and go straight for puts. I think the right lens to put onto this is to say I don't believe it can go higher.

And because I don't believe it can go higher and even if it does it would have to chew through all of the uh that resistance of the gap down. I'm looking at this as a bare call spread.

So, I'm looking at the November 2026, buying the 130 strike price out of the money, and then selling the 120 strike price call option, which is closer to in the money. You're selling that for 205.

You can pick up the 130 for 105. So, you're getting a net credit of about a dollar, at least you were before the market open. So, when you think about it, you have a good 20 points to the upside that the stock would have to go to before your option is even in trouble in the next 71 days, which I don't see that happening.

And then you're putting $10 at risk to make $1. So, you're looking at a potential 10% return in 71 days. I like that trade. It has built-in uh cushion of 20 points. If the stock stays the same, goes up a little bit, or goes down, you got three ways to win.

I think it's a perfect way to use options. Um, additionally, obviously, if we break above the 50-day moving average, that would be my I'm wrong level, but again, I don't see it doing that.

It'd have to chew through all that resistance that it fell from the most recent earnings.

Yeah, Lulu's down another 1.7% to just above $98 right now.