Last month I identified a short opportunity in Under Armour (UA). Now that the stock is getting close to the initial downside target for that sell setup, I've taken a look at the weekly chart, watching for parameters that might suggest at least a tradable low. This work has told me that stops should be tightened up on any shorts, and that we should also be prepared to turn it around for a trade if these next parameters hold and trigger an entry.
First let's look at the timing parameters illustrated on the daily chart. There are two time-cycle clusters underneath the current price that suggest a possible tradable low: between Dec. 17 and Dec. 19, and Dec. 24 to Dec. 26 -- right around the Christmas holiday. Under Armour is moving into these time cycles as it nears an important extension of a prior swing and some key weekly support that I'll show you on the next chart.
By backing up to a higher time frame, I get to see a bigger-picture bullish pattern that suggests the stock might be worth checking out for a buy in the coming week or so. There are two standout price-support zones that are visible on this chart. The first comes in between $47.19 and $47.90, and UA is essentially right above this area; the second comes in at $43.90 to $45.80. I can make a case for both of these areas being potentially important, given the healthy clustering effect you can see on the chart.
So here is the game plan: If you've taken a short against the last sell setup, tighten up your stops relatively close to current prices, as the stock is getting to a place where the decline could terminate. Second, watch the two key price-support zones defined above, and see if one them holds, followed by one of the buy triggers described here.
The setup will be even stronger if a low happens to coordinate with the timing work described above, though it is not essential for this to occur. If a buy-side trigger fires off, the maximum stop should be placed below the low end of the price-cluster zone. Regarding a target from a new low, the minimum level I would seek would be at least a $6 bounce -- though the stock could give you much more than that. If an entry is not signaled, I will back off the buy side until further notice.
