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Another potential earnings short-squeeze trade is branded performance apparel maker
Under Armour(UA - Get Report), which is set to release its numbers on Thursday before the market open. Wall Street analysts, on average, expect Under Armour to report revenue of $497.88 million on earnings of 46 cents per share.
Just recently, Credit Suisse reiterated its outperform rating on Under Armour, citing that concerns of a slowdown in top-line momentum are overdone and that a favorable sourcing environment and improved supply chain will increase operating leverage for the long term. The firm has a $59 price target on the stock.
The current short interest as a percentage of the float for Under Armour is very high at 16.3%. That means that out of the 78.99 million shares in the tradable float, 12.75 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 5.1%, or by about 613,000 shares. If the bears are caught pressing their bets into a solid quarter, then we could easily see a monster short-squeeze develop post-earnings.
From a technical perspective, UA is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending badly for the last three months and change, with shares dropping from its high of $60.20 a share to its recent low of $44.32 a share. During that downtrend, shares of UA have been mostly making lower highs and lower lows, which is bearish technical price action. That said, shares of UA have started to rebound off that $44.32 low and quickly move within range of triggering a near-term breakout trade.
If you're in the bull camp on UA, then I would wait until after its report and look for long-biased trades if this stock manages to break out above some near-term overhead resistance levels at $48.49 to $48.82 a share and then once it clears more overhead resistance at $49.51 to $51.30 a share with high volume. Look for volume on that move that hits near or above its three-month average volume of 1.8 million shares. If that breakout triggers, then UA will set up to re-test or possibly take out its next major overhead resistance level at $55.20 a share. Any high-volume move above $55.20 will then put $58 into range for shares of UA.
I would simply avoid UA or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops back below some key near-term support at $47 a share with high volume. If we get that move, then UA will set up to re-test or possibly take out its next major support levels at $44.32 to $44.07 a share.