Call Buyers Cheer as Nike Inc, Under Armour Inc Stage Rare Rallies

Retail rivals Nike Inc (NKE) and Under Armour Inc (UA) are bounding up the charts for once

Dec 5, 2016 at 10:44 AM
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Sporty retail stocks Nike Inc (NYSE:NKE) and Under Armour Inc (NYSE:UA) have gotten off to a fast start out of the gate. NKE was last seen 2.6% higher at $51.80 -- putting it on track to top its 50-day moving average for the first time since early September -- while UA is up 2.4% at $30.74. Below, we'll take a closer look at the news items driving the respective shares, and break down the recent action in the options pits.

NKE stock is sharply higher on an upgrade to "buy" from "hold" at HSBC, which also lifted its price target to $60 from $56. The bounce is a welcome sight for shareholders, who have watched Nike shares drop precipitously since their most recent high of $60.33 in late August. In fact, the stock has been the worst Dow component to own in 2016.

Shareholders haven't been the only ones holding out hope for NKE. During the last 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open three times as many calls as puts. The resultant call/put volume ratio of 3.09 ranks in the bullishly skewed 97th annual percentile.

For those looking to place short-term bets on Nike Inc, now is as good a time as any. The stock's Schaeffer's Volatility Index (SVI) of 19% ranks in the low 12th percentile of its 52-week range. In other words, near-term options are currently pricing in historically low volatility expectations.

Turning to rival UA, the stock has put in a pitiful showing on the charts this year. Despite this morning's upswing, the shares have surrendered over 26% in 2016, punished in late October on a dismal full-year forecast.

Yet, options traders have shown signs of optimism. UA sports a 50-day ISE/CBOE/PHLX call/put volume ratio of 1.85, outstripping seven-tenths of all readings from the prior 12 months. While a portion of the calls may have been purchased by short sellers hedging -- after all, 12.8% of the stock's float is sold short -- a capitulation among "vanilla" option bulls could result in headwinds.

That said, Under Armour Inc shares are getting a rare reprieve today. Boosting the retail stock is the company's 10-year uniform deal with Major League Baseball (MLB). This marks the first time UA has inked an agreement to provide uniforms for an entire sports league.

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