Following earnings, Under Armour (NYSE:UAA) proves its got game off and on the price chart. And for those still sitting on the bench, the bullish combination is screaming it’s time to suit up with a long Under Armour stock position. In short, it’s time for investors to go on the offensive. Let me explain …
As the New York Stock Exchange opening bell sounded to commence Wednesday’s game clock, Under Armour stock investors initially chose the wrong playbook to operate from.
Out of the gate, UAA stock hit a three-week low as bears took an aggressive opening move and swipe at shares. If you got up to grab a refreshment before the ringing stopped, however, you missed the equivalent of a big ol’ head-fake and offensive press, giving UAA stock bulls the home court advantage.
What was behind the move? It could have something to do with Under Armour’s short interest of nearly 21%, quickly and rightfully, getting a case of the cold feet. Bottom line, while the first quarter is looking a bit weaker for the company, Under Armour did keep its full-year 2019 targets intact. That supports the big picture premise, as UAA’s turnaround is in fact working. And that’s not all.
Under Armour stock’s Q4 earnings scorecard boasted profits of 9 cents versus views of 4 cents and a substantial improvement from last year’s fourth quarter break-even result. Under Armour also saw strong international sales growth of 24%, improving and better-than-forecast gross margins of 45.1% and inventory levels sinking to just 12% and their lowest in two years.
At the end of the day, Under Armour stock’s off-the-chart metrics are hinting strongly enough that bears can’t be faulted for throwing in the towel. And coupled with the UAA chart, bulls should be persuaded to come off the bench and suit up for some offensive play.
Under Armour Stock Daily Price Chart
Under Armour is not nearly as popular these days with Wall Street as arch-rival Nike (NYSE:NKE). But to steal a catchphrase, it’s time for investors to ‘just do it’ and buy UAA stock as Wednesday’s technical reversal has bulls scoring a decisive victory on the price chart.
Wednesday’s price thrust in UAA stock has formed a breakout move away from a small consolidation formed around the 50% retracement level and key 200-day simple moving average. Bottom line, or in this case, the squiggly price line — that’s bullish! And, if there had been any doubt of whether the December low was the start of a larger downtrend versus a corrective bottom, that game is officially over.
UAA Stock Strategy
For like-minded investors that appreciate a good turnaround story, UAA stock is in position to be purchased today with the expectation new relative highs are in the cards in the coming weeks.
I’d personally set an initial stop beneath Wednesday’s opening price of $20.18. That’s sufficient technical evidence our bullish view is wrong, while keeping the exposure to roughly 9% of Under Armour shares.
Alternatively, and if investors wish to have steadfast risk control with decent upside profit potential, the April $22.50/$25 call spread currently priced for about 90 cents is another smart way to play the game.
Investment accounts under Christopher Tyler’s management currently own positions in Under Armour (UAA) and its derivatives, but no other securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
