Nike Stock Tests January Bull Market Top


The Dow component Nike, Inc. (NKE) has completed a V-shaped rally towards the top of January’s bull market and may break out in the coming weeks, resuming its long-term uptrend. This price action follows a dramatic breakout by smaller rival Lululemon Athletica Inc. (LULU), underscoring continued demand for activewear and other health-related accessories throughout the pandemic shutdown. . (See also: Lululemon shares overbought and overloved ahead of earnings.)

In mid-May, the company announced that 100% of Nike-owned stores and 95% of partner-owned stores had reopened in China and South Korea, adding to strong digital demand and new store acquisition. members. Only 5% of U.S. stores were open at the time, but reopenings are accelerating now, restoring a sense of normalcy that should translate into even higher sales at the end of the second quarter.

Fiscal fourth quarter 2020 results that cover March, April and May will be released on June 25, with the rise of the confessional adding another bullish catalyst. Analysts expect Nike to report earnings per share (EPS) of $0.17 on revenue of $7.75 billion, which would translate to a significant drop from 2019. If specific metrics on the US impact were disclosed in the March earnings or May update, investors will have to rely on odds and speculation to make entry decisions.

NKE Long Term Chart (1995 – 2020)

The stock broke three-year resistance at $2.82 allocation-adjusted in 1995 and entered a short-lived uptrend that peaked at $9.55 in 1997. This marked the highest level of the next seven years, giving way to a complex decline that posted lower lows in the first quarter of 2000, when it hit a low of $3.22. The ensuing rise completed a round trip to the previous high in 2004, producing a breakout that did not gain momentum until 2006.

Steady progress in March 2008 posted a new high at $17.65, giving way to an orderly pullback that accelerated during the fourth quarter economic meltdown. Selling pressure eventually eased to a three-year low in 2009, resulting in a wave of recovery that completed a 100% retracement to the previous high in 2010. The stock immediately broke, propelling Nike to the market leader in the first half of the decade.

The uptrend peaked at the upper $60 in Q4 2015 and turned into a symmetrical triangle that contained the price action in a 2018 breakout that restored the stock’s leadership. This advance printed a healthy series of higher highs and lower lows, culminating in January 2020 with an all-time high of $105.62. It broke down from a small top model a month later and plunged in mid-March, eventually settling at a two-year low.

The second quarter rebound was on the same trajectory as the previous decline, reaching a point of January resistance on Wednesday. This spike could stall upward progress as the stock operates on overbought technical readings, possibly generating a pullback that provides a buying opportunity between $90 and $95. However, given the current strong momentum in the Dow Jones Industrial Average, it’s possible that Nike stock just goes up from here.

NKE short-term outlook

The monthly stochastic oscillator has charted a complex pattern since May 2019, entering a selling cycle that triggered strong waves of buying. The latest rise almost hit the overbought zone, triggering three bearish crossovers in the past 20 months. In turn, this suggests that the bulls are in control of the band at the moment, but the bears could take over at any time. This considerably increases the risk in the publication of results at the end of June.

Even so, accumulation readings have reached new highs, pointing to impressive buying power in the second quarter that should limit downward pressure in the weeks ahead. As a result, the V-shaped pattern now poses the biggest risk to the upside development, as this price action failed to create stable trading floors down to $60, making more difficult for multi-day slowdowns to find logical support levels.

The essential

Nike stock has returned to the top of the bull market and could break out, but further gains may not be possible without an extended consolidation phase.

Disclosure: The author held no position in the aforementioned titles at the time of publication.


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