Callaway Golf: Shares in bullish 'flag' formation

Callaway Golf Company (ELY) is engaged in the design, manufacture, and sale of golf equipment. Products include drivers, fairway woods, hybrids, irons, wedges, putters and balls. The company also sells such accessories as golf bags, golf gloves, golf headwear, golf footwear, golf towels, and golf umbrellas. In addition, Callaway licenses its trademarks to third parties for use on apparel, watches, travel gear and eyewear. The firm sells its products to pro shops, sporting goods retailers and mass merchants.

Callaway had good news for investors last week, when it said it expected FY07 EPS of 87-89 cents and revenues of $1.125 billion. Analysts had been looking for 87 cents and $1.11 billion. The CEO cited an improved product development process, improved inventory management and the successful re-launch of the Top-Flite brand for the favorable view. Wachovia subsequently upgraded the shares from "market perform" to "outperform." The stock popped into bullish "flag" consolidation pattern on the announcement. Prices frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.