Stock Analysis: Why are Traders Ready to Buy Under Armour Again?

Under Armor (NYSE: UA)  is an American sports clothing and Accessories Company. The company is a supplier of a wide range of sportswear and casual apparel mainly focusing on hi-tech sportswear for professional athletes. Under Armor’s global headquarters is located in Baltimore, Maryland. The company reported earnings on January 26, 2012. For the quarter ended December 31, the company met expectations on revenues ($403.1M) and beat expectations on earnings per share.

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The stock is currently in accumulation phase, a sign that buyers are entering the market. The stock sold off on Thursday when traders took profits off the table, but buyers bought the dip when the stock tested the 200 DMA. The stock has retraced 12% from its recent high price of $87.40 that occurred on October 31, 2011. A close below the 20 DMA of $74.60 could mark the $87.40 as recent high. The closest support can be found at $72.83, currently the 200 DMA, and the closest resistance can be found around the $82.70 area.

A few ways to trade this stock would be to either wait for a close above the $82.70 resistance to go long for a breakout trade or wait for a close below the $72.90 and buy puts on the stock. Another test of the 200DMA of $72.83 might signify a buying point as well. 

Despite the downgrades in Europe, the dips are currently being bought, and even though we are overbought in the markets, we can remain overbought for a while. Therefore caution should be exercised when trading, and you should always hedge your position. A stop-loss should always be in place as risk management is an important part of trading. This is an analysis and not a trade recommendation. 

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