Under Armour, Inc. (UAA) reported quarterly results before the opening bell on Tuesday, July 30, and shares got crushed as the sports apparel company projected declining sales in North America. The stock had a huge price gap lower, but weakness held its 200-day simple moving average at $22.24 and stabilized just above its monthly pivot at $22.91.
Before this morning's crash, the stock set its 2019 high of $27.72 on July 25. The stock closed Monday, July 29, at $27.44, up a solid 55.3% year to date and in bull market territory at 66.1% above its Dec. 26 low of $16.52. From $27.44 to the 200-day simple moving average (SMA), the stock plunged by 18.9%.
Under Armour stock set its all-time high of $54.70 during the week of Sept. 18, 2015. The stock plunged by a 79% bear market to a multi-year low of $11.40 during the week of Nov. 10, 2017. The stock has been attempting to recover from this slump since then. The weekly chart shows that the stock has failed at its "reversion to the mean" at $26.52. Under Armour remains a stock for traders, not investors, with a P/E ratio of 87.87 without paying a dividend, according to Macrotrends.
The daily chart for Under Armour
The daily chart for Under Armour shows that the stock has been above a "golden cross" since March 19, when the 50-day SMA rose above the 200-day SMA to indicate that higher prices lie ahead. This tracked the stock to its 2019 high. Then came the earnings plunge that held the 200-day SMA at $22.24 as a buying opportunity. Before this crash, the 200-day SMA was tested several times between March 22 and May 15, when the average was $20.85.
The close of $25.35 on June 28 was a key input to my proprietary analytics. The annual risky level remains at $37.34. The second half value level is below the chart at $9.75. The third quarter value level is $18.34, with the pivot for July at $22.91.
The weekly chart for Under Armour
The weekly chart for Under Armour was positive but overbought before this earnings report. The stock is now below its five-week modified moving average of $25.65 and below its 200-week SMA, or "reversion to the mean," at $26.52. The 12 x 3 x 3 weekly slow stochastic reading is expected to slip to 82.88 this week, down from 85.92 on July 26, which is still above the overbought threshold of 80.00.
Trading strategy: Buy Under Armour shares on weakness to the 200-day SMA at $22.24 and reduce holdings on strength to the 200-week SMA at $26.52.
How to use my value levels and risky levels: Value levels and risky levels are based upon the last nine weekly, monthly, quarterly, semiannual, and annual closes. The first set of levels was based upon the closes on Dec. 31. The original annual level remains in play. The weekly level changes each week. The monthly level was changed at the end of each month, most recently on June 28. The quarterly level was also changed at the end of June.
My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in. To capture share price volatility, investors should buy shares on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before their time horizon expires.
Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.