by Serge Berger | February 26, 2013 12:20 pm
Sports apparel stocks have been in fashion (pun intended) in recent years. Specifically, Under Armour (NYSE:UA) and its high-tech apparel, as well as Lululemon (NASDAQ:LULU) given the mega-trend in yoga and other apparel, have benefited and built their brands. But older dogs such as Nike (NYSE:NKE) have been part of the game, too, and even have outperformed in recent months.
Off 2009 lows, all three stocks staged significant rallies along with the broader market. On the chart below, they look very much alike through a longer-picture lens, technically speaking.
It is closer-up on the charts where all three look less stellar for the bulls — at least in the intermediate-term.
Let’s start with Lululemon, which since reaching its all-time high in May 2012 has formed a series of lower highs. The stock’s 50-, 100- and 200-day simple moving averages are fairly useless for analysis, but it is worth mentioning that just a few days ago, LULU again found resistance at a confluence zone of the former two moving averages before slipping back down to a key support level again.
The area near $66 has on and off served as support and resistance, dating back to May of last year. Since November, this area has now been tested four times (Remember: The more often a level gets tested, the weaker its support/resistance). The $66 area also happens to coincide with the 50% Fibonacci retracement level of the move off the summer lows up to the September highs. Thus, any break below there should result in a move to at least the low $60s, or close to a 10% selloff in the stock.
Under Armour’s chart also has an important lateral support line — in this case, closer to $44-$44.50. Just like Lululemon, this stock has displayed a series of lower highs, and any break on a daily closing basis below this support zone would usher in a significant new lower low. A first price target in such a case would be near $40, or about a 10% move below the support zone.
The chart of Nike is the strongest of the bunch, but also the one with the most defined stop-loss level for swing traders looking to lean against it for a stab. On Feb. 11, the stock made a new recent high but closed well off the daily highs, leaving behind a significant doji candle. The day’s high at $55.90 is the level to watch. The doji candle led to a series of lower highs; several of these daily candles also displayed long tails. If and when NKE snaps below $54, it too should be good for at least a 5% move to the downside.
Should the broader market have a few percentage points left in its recent downward consolidation, these three stocks could offer a little additional beta for those looking for high-probability trade setups.
Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free weekly newsletter here.
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