While SPY and QQQ are breaking out to new highs, today’s trade idea is breaking out of a two and a half year base.
This type of setup is one that could be good for a long run regardless of whether the market continues to make new all-time highs.
Click here for pattern that doesn’t need a strong bull market to be a big winner.
I’ve included the weekly chart of Under Armor (UAA) below so that you can see how it has been forming a base since its big volume drop in January of 2017.
Also, note the big down volume week in October 2017 followed by the big up volume week in Feb. 2018 that together formed the low of the base.
Finally, the December 2018 low did not make a new low for that year. This demonstrated that UAA had been thoroughly washed out on the down side.
I highlighted UAA in the column as it was breaking out of the $25.00 level a few weeks ago, and now it looks even better.
As you can see, the initial breakout has now consolidated between the breakout support of $25 and the 200-week moving average with the high of the consolidation being $27.72.
Last week it rallied from a swing low of $26.56 to its recent high of $27.72.
The trade, therefore, is simple.
The buy point is over $27.80 with a stop under $26.50.
UAA has a good option chain, so long calls would also be a good strategy.
There is also a chance that it could pull back before breaking out. The 50-day moving average around $26 would be a good place to look for a buy pattern with a stop under $24.70.
Rick Nartarian, Chief Investment Officer
The American Investor Daily