Under Armour preparing for a bullish spike

Intermediate

Under Armour (UAA) is the developer and distributor of footwear, accessories and branded performance apparel. Due to extensive marketing in Hollywood movies by leading actors, Under Armour had a massive rally from $1.51 in March 2009 to $52.87 in September 2015. That was quite a spike with amazing returns for investors.

Elliott wave analysis

Elliott waves were perfectly respected with a 12345 bullish trend, and we entered a correction into ABC. Price eventually finished wave C at the 78.6% retracement with the low at $11.45. Based on this count we are looking at the potential start of the next bullish run. A 12345 move within a bigger wave 1 was completed as well as an ABC correction in a bigger wave 2 with an Inverse Head & Shoulders (H&S) pattern having formed. Divergence on the RSI indicator supports this Inverse H&S pattern.

Now we are waiting for the break of the horizontal neckline and 200 Simple Moving Average on a daily chart, together with a volume spike for a buy signal. This entry would be into wave 3 within a bigger wave 3, allowing traders to catch the big move to the upside.

Daily chart

uaa daily

1-hour chart

uaa 1 hour

For the Inverse H&S we are looking for high volume break of the neckline and close above. Stop placement can be below the Right Shoulder or the Head for more conservative traders.

The 1-hour chart shows a rising channel that could be seen as potential continuation of the downtrend from September 2015. As long as the lows of wave 2 are not broken, this wave count is valid. If the stock breaks this rising channel to the downside, we could see more selling opportunities, but ultimately this stock looks like an attractive investment for the year at a relatively cheap price. The question is, if the stock could become cheaper before the next spike or not.

Earnings

We are also waiting for the next quarterly earnings on 11th of February (see the projections below). As most hedge funds target the stock closer to $30 level, the expectation is that a break to the upside through the neckline further supports the probability of the bullish trend. Earnings per share are expected to fall to 0.1 from 0.23, while revenue is expected to rise to $1.47B. Overall, technical show a positive probability for the next bullish move, provided we see a break on high volume to the upside.

Editor

Anton is an accomplished Director at Markom Development Ltd where he combines cross functional competencies in staff management, operations planning, customer retention and strategy development. BU... Continued

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