Higher Prices Ahead for CYOU, LULU

02/03/2011 7:07 am EST

Focus: STOCKS

The broad markets staged an impressive rally early in the week that resumed the powerful uptrend. Many individual names have positive chart patterns, indicating higher prices for the near term. Heavy resistance for SPY is around the 132-133 area. If initiating new longs, keep expectations in line with the market outlook.

The Russell 2000 Index has a potential bearish broadening top formation developing. The pattern has not triggered, while other major indices trend higher. It is important to monitor the divergence between the Russell 2000 Index and the other major indices to determine the health of the uptrend. If initiating shorts, select names that have broken their uptrends and have been in distribution patterns.

Below are two long ideas in Changyou.com Ltd. (CYOU) and Lululemon Athletica Inc. (LULU) with smaller expectations and suitable for those who are short-term and swing traders. 

CYOU triggered and confirmed a breakout of a bullish inverse head-and-shoulders pattern yesterday. Our target is  $47, and a protective stop would be triggered on a confirmed move back below the neckline ($36.35).



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LULU is range bound in a sideways rectangle pattern for approximately six weeks. The price is approaching the upward-sloping trend line, which may provide upward-sloping support and a breakout.



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The entry trigger for this trade is a breakout above $74 with a target of $82. A protective stop would be placed below the upward horizontal resistance line, which is at approximately $74. A trailing stop would be placed with a confirmed move below the upward-sloping trend line if the price is higher than $74.

By Zev Spiro

If you are interested in receiving Zev's free daily market letter, e-mail zevspiro@oripsllc.com with subject line "MoneyShow."

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