Can something become too popular? I remember the rise of Crocs (CROX). Do you? Crocs had a meteoric rise as everyone wanted a pair of its comfortable shoes. One day in 2007, I learned that my then three-year-old grandson just got a pair of Crocs! The light bulb went off. Surely everybody had now purchased at least one pair of Crocs. Who was left to buy? This anecdotal evidence did indeed mark the top for the stock.
A Google search for Growth Seeker holding Under Armour (UA) yielded 77.2 million results in just 0.66 seconds! Columbia Sportswear (COLM) only had 17.9 million results in about half the amount of time. Is UA too popular?
In this log chart of UA, above, you can see the uninterrupted trend from the 2009 single-digit lows to $100. Volume since early 2014 has been declining and that indicates a market with weakening technicals. Chartists like to see the volume increase on rallies. Another item to note is the distance from the trend line. In 2010 and 2011, UA rallied strongly above the trend. Compare that to the past year when the prices for UA hugged the trend line.
Last month, UA lost 20% in a month! Prices rebounded smartly as the overall market held its own, but the rally has stopped at the underside of what now is an area of resistance. Note above that UA has not yet broken its major uptrend but longs could be sweating if UA does not break out to a new high soon.