Judgment Day Might Soon Be Upon Under Armour Inc (UA)

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Shares of sports apparel company Under Armour Inc (NYSE:UA) have had a roller coast year. Under Armour stock was down by about 20% at the January lows, then up around 20% at the April highs, and they’ve now settled into 8% declines for the year-to-date.

Beat the Bell: Under Armour Inc (NYSE:UA)Like so many consumer cyclical stocks, UA stock has struggled to get out of its own way. Now, with earnings just one week away, shares are dancing on a thin line of support.

While the mainstream financial media and your average mutual fund manager for the most part remains bullishly tilted every time they see an economic data point that isn’t falling off a cliff, a look beneath the surface reveals a different picture.

Earlier this week, for example, U.S. industrial production for the month of September came in at -1% on a year-over-year basis. While most economists pointed out the absolute number, the fact is that this number has slowed over the past 12 months, as have so many other data points, including job creation.

From a technical perspective, after the initial V-shaped reversal for the U.S. stock market wore off by late spring, many stocks and sectors stopped going up. Specifically, some big-name consumer discretionary companies such as UA are now back in the negative for the year and look vulnerable.

Another round of selling could ensue should they breach current technical support levels.

UA Stock Charts

We see in the first chart that since topping out in August and September of 2015, Under Armour stock last December broke below its multiyear support line as well as below its 50-week simple moving average, which more or less matches up with its 200-day SMA. Since then, despite a sharp V-shaped reversal off the January lows, UA has continued to form a series of lower highs.

The 2016 trend thus now consists of a series or lower highs, all of which are pushing on an ever-thinning line of support (orange dotted line).

Under Armour UA stock chart weekly view
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On the daily chart, we see that the lower highs are pushing down on the thinning support line. However, because of the choppy price action year-to-date, the intermediate-term SMAs (50-, 100- and 200-day) currently are all tightly coiling together.

Very simply, the longer these moving averages are not separated, the more violent the ultimate separation (i.e., a resolution in price action) tends to be.

uadaily
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So, with Under Armour earnings scheduled for Oct. 25, judgment day might soon be upon UA stock. At this point, only a decisive up-gap and rally following earnings could save the stock from ultimately violating the 2016 support line and keeping Under Armour from faltering back into the low $30s.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/10/under-armour-inc-ua-stock-judgment-day/.

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