Option Trade of the Day: Under Armour, Inc. (UAA)
Friday saw more selling hit the market after the March employment report disappointed and the verbal tariff war between the U.S. and China heated up again. The three main indices all lost of two percent on the day with the Dow suffering the worst loss at 2.34%.
The best performer was the utilities sector, but it still lost 0.79%.
The industrial sector was the worst performer with a loss of 2.77%.
The industrial sector suffered more than the other sectors as China has targeted several big industrial companies for tariffs if the Trump administration doesn’t back off on targeting Chinese companies.
For the first time in nine days, my scans produced more bearish signals than bullish signals.
The final count was one bullish signal and 14 bearish signals. My barometer did manage to remain in positive territory with an 11.8 reading.
One of the companies that caught my eye on the bearish list was Under Armour, Inc. (NUSE: UAA). The company’s fundamentals are pretty poor as evidenced by the EPS rank of 29 from Investor’s Business Daily and an SMR rating of a “D” from IBD.
While it was the daily chart that generated the bearish signal for UAA, it was the weekly chart that got my attention. We see that the 52-week moving average has been keeping the stock in check for the last few months. The stock hasn’t closed above the trendline in two years and I look for that streak to continue.
Buy to open the May18 17.50 strike puts on UAA at $1.75 or better. These options expire on May 18. For these options to hit a 100% gain the stock will need to drop to $14.50 and I think that is very doable. There is a little bit of support in the $15.60 area, but there isn’t much below that until you get down to $12.50.
— Rick Pendergraft