Sunday, December 16, 2007

Under Armour

Just over two years ago Under Armour went public in the most successful (in terms of % gain on opening day) ipo since 2000. After being offered and opening at $13, UA climbed to close at $25.30, almost a 100% gain in the first day of trading. That was just the beginning because UA then rose to a peak of $73.40 before rolling over to around $45 recently:

This chart is really interesting to me for a number of reasons. You can clearly see a change in UA's momentum that occurred in August leading up to the most recent quarterly earnings on Oct 30th (the big red circle). After giving up its 50 dma, UA had bounced off its 200 dma and trended higher up into the report. On news of yet another blowout quarter the stock exploded higher the day of earnings back above its 50 day, volume surged to the highest level since the ipo as the bulls and bears duked it out over their impression of the earnings. The bulls seem to have been happy about the better than expected earnings per share while the bears complained about the growing inventories.

At any rate the battle for $60 by was won by the bears and the stock slid to back under 45$ on Friday, the next level of major significance/support. As you can see in the weekly chart up top, the average price that shares have traded at since the ipo is about $45. So above this level the typical investor is net positive and below this level the average investor is at a loss. There maybe be a significant number of people looking to just get out without a loss once $45 is lost. Watch for $41.37 to get tested and taken out after $45 is gone.

Hat tip to Xerxes for the play.

Disclosure: I own UA puts

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