Under Armour (UAA) - Get Report (UA) - Get Report tends to be a volatile earnings mover. And with its fourth-quarter-earnings report scheduled Tuesday before the open, investors will find out if another big move is in store.
When the Baltimore apparel-and-footwear company in early November reported its most recent quarterly results, the shares were hammered. In the one day following the earnings, the shares fell 19% and nearly sent Under Armour to 52-week lows.
After a few months of chopping below $20, Under Armour stock finally found some momentum and has since undergone a strong rally. Investors are concerned that the current report will disappoint, unwinding a chunk of those gains.
While the numbers may be fine, concern about China and the impact from the coronavirus may still cause investors to react cautiously with Under Armour stock.
Let’s take a closer look at the charts ahead of the earnings.
Trading Under Armour Stock
The charts for Under Armour stock are very interesting right now.
From the November lows, Under Armour shares went on a potent rally, climbing about 30% in roughly a month. That rally took the stock price toward $22, where it twice topped out and began trending lower.
While it initially pushed through the declining 200-day moving average, it could not sustain above it. Now, this key moving average is slowly squeezing UAA stock lower. Working in the bulls’ favor, however, is the rising 50-day moving average and $20, both of which are acting as support.
So now we have this sort of wedging, flagging pattern after a strong rally from the lows. That’s in addition to notable range support and range resistance, along with a key moving average of support and a key moving average of resistance.
Do you see why I called this chart very interesting?
Now for the unfortunate part: Playing ahead of earnings is simply a gamble. We will need to see how the stock reacts once the company reports earnings - whether the bulls or the bears take control.
Right now, the options market is pricing in a 12.5% move in either direction by the end of the week.
If the stock can muster that strong of a rally, it will propel Under Armour stock over the $21-to-$22 area and the 200-day moving average.
It will put the bulls firmly in the driver’s seat, provided this prior resistance level can act as support. Over this area will put $24 on the table, and above that, Under Armour stock can begin filling its July gap up toward $27.
Should the post-earnings move result in a decline rather than a rally, $20 and the 50-day moving average are unlikely to act as support as they're already in such close proximity. If they do, then the bulls still have some control, although the stock will likely remain a battleground.
Below the January low of $19.50 and the $17 level is on the table.
Here’s the bottom line: On a post-earnings rally, see that Under Armour stock closes above the 200-day moving average. Over $22 is even better.
On a decline, see if UAA shares lose the 50-day moving average. Below the January low and this stock may have much more downside ahead.