Under Armour Inc: What Lies Ahead for UA Stock

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Sports apparel company Under Armour Inc (NYSE:UA) rallied last week after its latest quarterly earnings report, which came in better than analyst expectations. While UA stock remains a good growth story, its stock price has once again rallied too much too fast.

Beat the Bell: Under Armour Inc (UA)The upside? You can at least define your risk in Under Armour right now.

When UA reported fiscal first-quarter earnings, net income came to $19.2 million on top line revenue of $1.05 billion. This compares to net income of $11.7 million on revenue of $804.9 million in the same period one year ago. Furthermore, Under Armour upped its revenue guidance for the full year 2016 from $4.95 million to $5 billion.

On April 21, investors were quick to cheer the earnings report as a whole, and UA stock rallied to the tune of nearly 7%.

UA Stock Charts

For some perspective, let’s once again look at Under Armour through the longer-term multiyear lens on the weekly chart.

Here we see that the stock into September 2015 rallied too steeply as it got too far removed from the black diagonal support line. After becoming too extended on the upside, and after the formation of a double top, the slide began last September. To the January lows, this slide amounted to a roughly 40% correction. Along the way, UA stock sliced through its 2013 uptrend line and broke just about any other medium-term support areas.

The V-shaped reversal since the January lows has been equally ferocious, and on the weekly chart, it’s now retesting the broken 2013 support line, which may now act as resistance for a while.

Under Armour UA stock chart weekly
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If we take a look at the daily chart of UA stock, we see that the rally off the January lows has since broken above the stock’s red 200-day simple moving average, which also coincided with a layer of horizontal resistance around the $44 area.

While technical analysis 101 would qualify the post-earnings up-gap and rally as a technically sound move that should lead to a continued rally, in the near-term, Under Armour does look stretched. Note that the MACD momentum oscillator, for instance, has been in overbought territory since late February.

While such readings can remain overbought for a considerable amount of time, two months is a considerable amount of time … so a mean-reversion lower looks to be in the cards.

Under Armour UA stock chart daily
Click to Enlarge

Trading Under Armour

Open-minded active investors and traders could look to short UA stock on a break and hold below $46 using an initial price target in the $43 to $44 range.

Alternatively, should stock chasers choose to give UA another lift higher, traders could buy UA stock on a break and hold above $47.80 for a move into the $50 area.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/04/under-armour-inc-ua-stock-stretched/.

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