Speciality Retailers Lululemon Athletica and Michael Kors Find Support at Moving Averages

Since the beginning of May many speciality retail stocks have taken a beating.  In fact, several of the leaders in the first part of the year dropped over 20% in less than a full month.  Recently, the S&P 500 found support at its 200 day moving average and many stocks have pushed higher.  Two names that are acting particularly well over the last few days are Lululemon Athletica (LULU) and Michael Kors (KORS).

Lululemon Athletica Bounces Off 200 DMA

In a similar pattern to the overall stock market, Lululemon bounced off its 200 day moving average and has moved significantly higher in the last three days.  On Tuesday, June 19th, 2012 LULU is up over 2.5% heading into the final hour of trading.  The 200 day moving average has been a very strong support line for Lululemon over the years.  During its current bull run that started in March of 2009 at around $2 a share the stock has tested its 200 day moving average six times and each time the result is a very strong move higher.


Photo by sushi_zume via Flickr

The past does not predict the future but this stock seems to perform best when under pressure.  The company has reported that supply cannot meet demand for their yoga products.  This is the problem that all retailers would love to have.  Lululemon has also done a very good job of making certain that growth is slow and steady.  They are not a retailer that opens hundreds of new stores in an area each and ever year.  In fact, most Lululemon locations started out as solely weekend locations.  This helps the company reduce real estate costs.

Michael Kors Surges 6% to Test 50 Day Moving Average

Michael Kors has been a very hot stock since it IPO’d in December of 2011.  In fact, the stock doubled in less than five months before the recent decline.  Almost every single retail name took a beating during the months of May and early June.  In mid June some of these names started to get a bid and have moved higher.  On June 19th, Michael Kors is having one of its best days since the recent decline.  At one point, the stock was up almost 7% in the middle of the trading day.

The 50 day moving average is still above the current price so it will be interesting to see if this serves as a point of resistance.  If the stock can break the 50 day moving average in strong volume there is a good chance the 50 day moving average will quickly turn to a support level.  With major July 4th sales events coming up it will be interesting to see how these two names perform in the summer months.