Sports apparel and accessories company Under Armour, Inc. (UA) continues to reward trend followers as well as quick traders. Those leaning against the stock had to be happy with quick trades and exercise iron discipline in recent years, while the bulls keep pushing higher. Such is often the case for trend follower stocks, and sticking with these trends is often psychologically the most difficult thing to do for investors and traders alike.
Despite an already steep year to date rally of roughly 60%, the stock continues to act well technically as it routinely consolidates its breakouts to new highs. As such are signs of a healthy stock, it is difficult if not somewhat idiotic to lean against a stock like this in the near term, at least not until clear distribution signs are in place.
On the next chart below notice the strong breakouts in May and again in late July. The stock continues to churn and burn higher despite and regardless of any weakness in the broader market as trend followers look for stocks to plow money into. Facebook Inc (FB), which I discussed HERE two weeks ago, on August 26th finds itself in a similar spot post its major earnings breakout in July as investors and trend followers are looking for a place to generate returns since the broader market has taken a breather in August.
After its most recent breakout past resistance on Thursday September 5th, Under Armour, Inc. (UA) finds itself trading roughly 35% above its 200 day simple moving average (red line) and also trading well above its 100 (blue) and 50 (yellow) day moving averages. At 35% above its 200 day the stock is historically well extended as the right here right now is concerned. As such, traders looking to play this frisky pup from the long side might find better levels somewhat lower in coming days. At the same time, waiting for too much of a pullback could well lead to traders missing the boat on the long side and any major price reversals should be taken as a warning sign that trend followers are jumping ship – that’s just good risk management.