Lululemon (LULU) Surges on Earnings Beat

Shares of Lululemon Athletica (LULU, $69, up $x) are rocketing higher today following an earnings beat after Wednesday's close. The company reported a profit of $0.47 a share on revenue north of $544 million while analysts were expecting $0.43 a share on sales just south of $540 million.

Looking forward, LULU said Q4 earnings would come in between $0.96-$1.01 a share on revenue of $765-$785 million. The suit-and-ties had penciled-in a profit of $1.01 a share on sales just below $787 million.

Despite the lowered guidance, shares are surging 15% and are trying to clear the early September gap down from $76 to $68. Continued closes above this level would be bullish for a possible run towards $78-$80 over the next few months. The 52-week peak is at $81.81. Support will try to hold at $68-$66 and the 200-day moving average on a pullback.

LULU

The LULU December 60 calls (LULU161216C00060000, $9.18, up $6.28) are zooming 217% on the stock's breakout and expire next Friday. The LULU January 60 calls (LULU170120C00060000, $10.02, up $5.88) are soaring 142% on the news.

While there could be further upside to LULU shares and the aforementioned options, there could be an opportunity down the road to go short if shares fail to hold $68-$66 going forward.