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Under Armour Surges on Earnings but Nears Major Resistance

Under Armour stock is flying higher on better-than-expected earnings, but is nearing major resistance. Here's how to trade it now.

Under Armour  (UAA) - Get Free Report  (UA) - Get Free Report stock is flying higher on Tuesday, up over 17% in midday trading.

The massive rally comes after better-than-expected earnings and as management raised its outlook for the full year.

Assuming the stock finishes higher on the week, it will mark Under Armour’s fourth straight weekly gain.

The company reported its third-quarter results before the open, allowing the stock to ignite higher. Of course, it helps that the overall market is trading higher on the day too.

With today’s gains, it has many bulls feeling comfortable with their ownership vs. Nike  (NKE) - Get Free Report

Although the latter is of very high quality, Under Armour shares have performed nicely, up 86% over the past 12 months vs. Nike’s gain of just 40%.

That said, longer term measures of return — such as three-year and five-year results — have Nike trouncing Under Armour.

While today is a win for the bulls, bears are keenly aware of where major resistance rests on the chart. Hint: it's close. 

Trading Under Armour Stock

Daily chart of Under Armour stock.

Daily chart of Under Armour stock.

In May, Under Armour stock rallied to a high of $26.45 and faded hard, ultimately bottoming near $18.50.

From there, bulls enjoyed an aggressive rally up a high of $26.02, but again the stock endured a painful decline. On the plus side, that decline found support near $20.

With the back-and-forth action, it was very clear that Under Armour was forming a wedge pattern, marked by higher lows and lower highs. That pattern was broken on Tuesday, when Under Armour stock pushed through the upper end of wedge resistance.

However, the stock is running into a major resistance zone between $26 and $26.50. After penetrating this zone earlier in the session, the stock is currently back below $26.

Should this resistance area again reject Under Armour, bulls have to be on guard against a fade back to lower prices. Below Tuesday’s low near $25 and the trade could gain momentum on the downside.

On the flip side, if Under Armour stock can continue higher and clear the massive gap-fill at $27 from July 2019, we could be looking at a run to the 2019 highs at $27.72.

While it may be a bit premature to be talking about a move over this level, it has the potential to trigger a multi-year breakout into the $30s.