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Under Armour Chart Says to Avoid Stock After Dismal Earnings

Under Armour is falling hard after a dismal earnings report. Here's how to trade the stock now as charts point to more potential downside.

It’s not looking good for Under Armour  (UAA) - Get Under Armour, Inc. Class A Report. Shares have fallen more than 11% on Monday after disappointing quarterly results.

An adjusted loss of of 34 cents a share missed analysts’ estimates by 17 cents, while revenue of $930.2 million sank 22.5% year over year and missed expectations by almost $9 million.

It was the company’s first quarter with sales below $1 billion since 2015 and management expects the pain to continue.

Under Armour forecast second-quarter revenue to fall 50% to 60% year over year. That’s well below the roughly 30% drop that analysts were expecting and would equate to sales being far below $1 billion and last year’s $1.19 billion in the comparable quarter.

With that in mind, it’s no wonder Under Armour stock is so weak on Monday. Truth be told, shares have been relatively weak for months now.

Trading Under Armour

Daily chart of Under Armour stock.

Daily chart of Under Armour stock.

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While the overall market has been able to climb to its 61.8% retracement for the 2020 range, Under Armour barely climbed to its 23.6% retracement.

Up “just” 21% from its March lows, Under Armour is badly lagging the overall market’s 33.4% rally and Nike’s  (NKE) - Get NIKE, Inc. Class B Report 50% rally.

Now losing the $9 to $9.25 area, shares look to be in trouble. If Under Armour stock can’t reclaim the $9 level before the close or on Tuesday, a drop to $8 could be in the cards.

For now, the $7.50 to $7.75 area has been solid support. But with such poor quarterly results and such ugly guidance, what motivation do bulls have to bid this name up? A move below $8 could trigger a return to this support zone, putting the 52-week low of $7.39 in play.

A look at the chart above highlights just how in control the sellers have been. Despite the meager rally attempt we’ve seen in the stock, you may also noticed the rejection from the 50-day moving average.

Bulls need to be careful with this one. Neither the fundamentals nor the technicals are working in Under Armour’s favor. To even have a shred of momentum on the upside, we need to see the share price reclaim $9.25 and close above the 50-day moving average.

From there, that will put the 23.6% retracement in play near $11, followed by a gap-fill up toward $12.60.