Under Armour Inc. (NYSE: UAA), the American sports equipment company that manufactures footwear, sports, and casual apparel, seems to be getting ready for a price bump as per the latest charts.
Bullish Move – Chart Indications
#1 Falling Wedge Pattern Breakout: As you can see from the daily chart, the stock was forming a falling wedge pattern for the past several months. This pattern is marked as purple color lines. A falling wedge is a bullish pattern and a breakout from it implies that the stock may move higher in the short term. Currently, the stock has broken out of the falling wedge pattern, indicating possible bullishness.
Daily Chart – UAA
#2 Price above MAs: The price is currently above both the short-term moving average of 50-day SMA and the longer-term moving average of 200-day SMA. This usually implies a possible bullish bias for the stock.
#3 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the daily chart. This indicates possible bullishness.
#4 MACD above Signal Line: In the daily chart, the MACD (light blue color) is currently above the MACD signal line (orange color). This indicates a possible bullish setup.
#5 Bullish ADX and DI: The ADX line has started to move up from below –DI and +DI lines. The +DI line is also currently above the –DI line. This indicates possible bullishness.
#6 Above Resistance Area: The stock’s weekly chart shows that the stock is currently trading above a resistance area. This is marked in the chart in orange color. This is a possible sign of an upcoming bullish move.
Weekly Chart – UAA
#7 %K above %D Line: The weekly chart shows that the %K line (light blue color) is currently above the %D line (orange color) in stochastic. It is also moving higher from oversold levels. This usually indicates a bullish setup.
#6 Bullish RSI: The RSI is currently above 50 and moving higher, indicating the strength of the current upmove.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for UAA is above the price of $22.80.
TP: Our target prices are $26.00 and $30.00 in the next 4-6 months.
SL: To limit risk, place a stop loss below $20.70. Note that the stop loss is on a closing basis.
Our target potential upside is 14% to 32% in the next 4-6 months.
For a risk of $2.10, our first target reward is $3.20 and the second target reward is $7.20. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers 2x to 3x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the falling wedge pattern with high volume. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in the sector.
Happy Trading!
— Tara
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