The stock gapped below its monthly value level at $19.08, indicating risk to its Dec. 26, 2018, cycle low of $16.52. A lower target is the November 2017 low of $11.40.
This marks the third consecutive quarter of a price gap lower for the stock. On July 30 and Nov. 4 the athletic-apparel retailer beat earnings estimates, but weak guidance resulted in huge price gaps lower.
What’s interesting is that today’s earnings report was for the quarter ended in December. This was before the impact of coronavirus.
Now the company says the disease would cost the company $50 million to $60 million in first-quarter 2020. Here’s the full coverage of the earnings report as compiled by TheStreet.com.
Shares of Under Armour traded as low as $16.60 this morning. At this level the stock is down 23% year to date. It's in bear-market territory 40% below its 52-week high of $27.72, set July 25. The stock is just above its cycle low of $16.52 set on Dec. 26, 2018.
Longer term, the stock is consolidating a bear-market decline of 79% from a high of $54.70, set during the week of Sept. 18, 2015, to the low of $11.40 set during the week of Nov. 10, 2017.
The stock is also consolidating the bull-market runup of 143% to $27.72, set on July 25.
This performance tracks my theme that individual stocks can be extremely volatile within what Wall Street calls an 11-year bull market for stocks.
Use my daily and weekly charts and key levels as road maps that can help you capture a portion of this volatility.
Under Armour is not a stock for value investors as its price-to-earnings multiple is elevated at 61.4 and it pays no dividend, according to Macrotrends.
The Daily Chart for Under Armour
Courtesy of Refinitiv XENITH
The daily chart for Under Armour clearly shows the three huge price gaps lower following the past three earnings reports: July 30, Nov. 14 and Feb. 11.
The chart shows a golden cross that formed on March 18 when the 50-day simple moving average rose above the 200-day simple moving average. This indicates that higher prices would follow.
The stock was a buy at the 200-day SMA at $20.99 on March 21 and this tracked the stock to its July 25 high of $27.72.
After the July 30 price gap lower, a death cross formed on Sept. 18, when the 50-day SMA fell below the 200-day SMA. This indicated that lower prices would follow. The stock could have been sold at the 200-day SMA at $21.62 on Dec. 26.
The horizontal lines are the monthly pivot at $19.08, the weekly risky level at $21.94 and the quarterly risky level at $27.20.
The Weekly Chart for Under Armour
Courtesy of Refinitiv XENITH
The weekly chart for Under Armour will end this week negative, with the stock below its five-week modified moving average of $19.61.
The stock has been below its 200-week simple moving average, or reversion to the mean, at $23.14 since the week of Aug. 2, shortly after the Nov. 14 negative earnings reaction.
The 12x3x3 weekly slow stochastic reading is projected to fall to 63.39 this week from 72.55.
Without a value level the downside risk is to the low of $11.40 set during the week of Nov. 10, 2017.
Trading Strategy: Reduce holdings on strength to its monthly pivot at $19.08. I currently do not show a value level.
How to use my value levels and risky levels:
The closes on Dec. 31, 2019, were inputs to my proprietary analytics. Quarterly, semiannual and annual levels remain on the charts. Each uses the past nine closes in these time horizons.
Monthly levels for February were established based on the Jan. 31 closes.
New weekly levels are calculated after the end of each week.
New quarterly levels occur at the end of each quarter. Semiannual levels are updated at mid-year. Annual levels are in play all year long.
My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in.
To capture share price volatility investors should buy on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before its time horizon expires.
Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.