Under Armour Stock Could Be Poised For Another Upside Move

UAA stock is trading near a historically bullish trendline

Managing Editor
Apr 19, 2018 at 11:48 AM
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Under Armour Inc (NYSE:UAA) is lower today, down 0.4% to trade at $16.03. The stock has struggled to breakout in 2018, consolidating mostly within the $16-$18 range since its earnings-induced bull gap in February. If past is precedent, though, it could be time to bet on Under Armour's next leg higher, as it recently approached a historically bullish trendline.

Specifically, the shares have pulled back within one standard deviation of their 160-day moving average. According to Schaeffer's Senior Quantitative Analyst Rocky White, after the previous two times UAA stock pulled back to this moving average after spending a significant amount of time above it, it averaged a solid 21-day gain of 9.43%, and was higher both times.

Pullbacks UAA

Should Under Armour stock start climbing, it could send shorts scurrying. Despite the equity's strong start to the year, short interest has only continued to rise, increasing by 26% during the two most recent reporting periods to 67.66 million shares, a nearly 10-year high. This represents 18.3% of the total available float, and almost 13 days of pent-up buying power, going by average daily volumes. 

Although UAA has added 11% already in 2018, analysts remain very bearish. Of the 30 brokerages covering the security, just four view it as a "buy." A resumed climb higher in the next few weeks may prompt some analysts to re-think their bearish stances, especially if the company can impress in the earnings booth when it reports the morning of Tuesday, May 1.

The security remains plagued by pessimism in the options pits, too. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the 10-day put/call volume ratio of 1.15 ranks in the elevated 79th annual percentile, meaning puts have been bought to open relative to calls at a faster-than-usual clip.

Echoing this, Under Armour's Schaeffer's put/call open interest ratio (SOIR) of 1.24 ranks in the 92nd percentile of its annual range, suggesting near-term traders have rarely been more put-biased in the past year. An unwinding of pessimism in the options pits could add fuel to the stock's fire.


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