It’s earnings season and one underdog looking worthy of a wager is Under Armour Inc (NYSE:UAA). But if you’re going to bet on ‘da bulls continuing to move UAA stock up the field on the price chart; a bull call spread remains in the starting line-up. Let me explain.
For UAA stock bulls — and bears for that matter — it’s almost officially game time once again. The athletics retailer is set to announce earnings next Tuesday on May 1 in front of the opening bell. Last quarter, investors jumped aggressively into shares following the company’s mixed, but in our view, mostly better-than-expected or feared quarterly results.
Can Under Armour (mostly) deliver again off the field of play — and convincingly so, on the playing pitch of the UAA stock chart for a second time in a row?
With the expectations bar set reasonably low and the Street forecasting a loss of 4 cents and sales of $1.1 billion, I personally like the long game in UAA stock. And while I wouldn’t call Deutsche Bank a true fan, an upgrade Monday from “sell” to “hold” which cited Under Armour’s “rapidly growing” growth overseas does have us think more of Wall Street’s resident bear population may be jumping on the ‘da bulls bandwagon soon enough.
UAA Stock Daily Chart
It has been nearly three weeks since last penning a bullish article on UAA stock at InvestorPlace. But despite shares being off nearly 6% Under Armour has continued to put together technical signs a meaningful bottom is in place and a new bullish trend is underway.
Following UAA’s March confirmation of an emerging uptrend, shares have continued to hold the key, earnings-driven price support with last week’s additional testing. The price zone is now also backed by a Golden Cross pattern as the 50-day simple moving average has crossed above the 200-day simple moving average.
Further, with Monday’s firm gain clearing both moving trend-lines on increased and above-average volume and maintaining a supportive stochastics set-up; UAA looks increasingly well-positioned on the price chart.
Bottom line, shares may not sprint higher as Under Armour’s overall business growth simply isn’t there right now. But as a turnaround play, I’ll continue to bet on the bulls attacking fresh highs and maybe even scoring championship style returns in 2018.
UAA Stock Bull Call Spread
Reviewing UAA’s options and given our expectation for the recently established uptrend to continue, one favored spread combination remains an out-of-the-money bull call spread. Specifically, with shares at $16.73, the July $20/$22.50 call spread for 28 cents still looks attractive.
This vertical is now priced for half of the 55 cent purchase price detailed in early April when shares were at $17.89. Aside from the even lower cost of entry and limited risk, this play still affords sufficient time on the calendar to enjoy a profitable pay-off. That’s particularly true given next week’s potential earnings catalyst and ‘da bears increasingly on the defensive and vulnerable to covering a losing wager.
Investment accounts under Christopher Tyler’s management currently own positions in Under Armour (UAA) and its derivatives. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
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