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Turning Point Technical Analysis: Try A UA/XLY Pair Trade

Wayne Duggan

Turning Point Analytics believes Under Armour Inc's (NYSE: UA) tough year is about to get even worse. Under Armour’s stock is down 15.6 percent in the past year, but Turning Point believes the stock’s technical trend remains downward.

After a 14 percent rally off of support in the $35-37 range, Under Armour is now once again up against its long-term falling resistance line.

Turning Point believes Under Armour’s support is now vulnerable to a breakdown. The firm has placed a target price of $32.52 on Under Armour.

The firm points out that Under Armour’s weakness is shared by a number of other apparel stocks and points out similar downward trading patterns in Nike Inc (NYSE: NKE), PVH Corp (NYSE: PVH), Columbia Sportswear Company (NASDAQ: COLM), Hanesbrands Inc. (NYSE: HBI) and VF Corp (NYSE: VFC).

Related Link: Will The Fed Derail This Rally?

For traders that would prefer to hedge their bearish bets on Under Armour, Turning Point recommends pairing an Under Armour short with a long bet on the Consumer Discretionary SPDR (ETF) (NYSE: XLY). The chart below shows the UA/XLY ratio.

“Note that the rally since early August puts UA/XLY right at the 11-month downtrend line = resistance,” the firm notes.

Turning Point explains that the XLY should benefit from large holdings of stocks with bullish technical trends, such as Amazon.com, Inc. (NASDAQ: AMZN) and Home Depot Inc (NYSE: HD).

Latest Ratings for UA

Date Firm Action From To
Aug 2016 Susquehanna Initiates Coverage on Positive
Jun 2016 Buckingham Research Upgrades Neutral Buy
Jun 2016 Jefferies Maintains Hold

View More Analyst Ratings for UA
View the Latest Analyst Ratings

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