Under Armour’s stock has dropped over 18% since August, approaching its all-time lows. Recently, however, it rose by 8.59% after Prem Watsa, a Canadian investor, bought 15.6 million shares, hinting at a possible short-term breakout.
The stock is now above a downward trendline at $4.89, which dates back to May 2020. To confirm a breakout, it needs to break through resistance levels at $5.15 and $5.51. This will require strong buying activity and may involve a short squeeze. Additionally, a separate downward trendline from December 2024 crosses these resistance points, adding more obstacles.
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The large share purchase in Under Armour signals a significant change. After a rough stretch in 2025 and nearing historic lows, this investment suggests a potential floor may have been reached. We see this as a possible turning point after a long period of uncertainty in the market.
The break above the long-term $4.89 trendline has caught our attention. We are considering out-of-the-money call options, possibly with February 2026 expirations, to take advantage of a potential uptrend. This strategy allows for greater returns if momentum continues while clearly outlining our risk based on the premium paid.
The chance for a sharp rise is heightened by the stock’s current short interest. Recent data shows over 15% of the public float is sold short, so any sustained increase beyond the resistance levels might trigger a short squeeze. This could help move through the tough $5.15 and $5.51 levels.
It’s important to remember that this comes after a challenging year, reflected in a mixed third-quarter earnings report from November 2025. While international sales looked promising, weakness in North America has kept many investors at bay. This context of low expectations makes the recent institutional buying significant.
We should also be aware that the 8.6% surge may have increased implied volatility, making options pricier. If the stock cannot hold above the $4.89 breakout level, the bullish outlook might quickly deteriorate. Therefore, traders should consider strategies like call spreads to lower entry costs and manage the risk of a false breakout.
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