Nike, Inc. (NYSE:NKE) fell 4% after the release of its first quarter results on September 23. The society beat the estimates but expects revenue growth to be flat or down for the second quarter.
For technical traders, Nike stock was bound to fall regardless of the news as the stock had set up a bearish flag on the daily chart with the bearish pole created between September 10-20 and the rising channel of the flag formed over the next four days.
The Nike graphic: Nike fell about 9% between September 24 and 28, which was equal to the percentage length of the bear’s flagpole (the expected measured movement). On Wednesday, the stock rebounded around 1.75% and hit Tuesday’s high for the day.
Nike’s stock has two close ranges, and since the gaps close 90% of the time, it’s likely that the stock will trade in both ranges at some point in the future. Nike has a gap below that has been partially closed between around $134 and $145 and a gap above between the $151 and $158 levels.
Wednesday’s bullish move pushed Nike’s Relative Strength Index (RSI) back above the 30% level. On Tuesday, the stock’s RSI fell to around 25%, putting it in oversold territory. When the RSI of a stock falls below the 30% level, it is a buy signal for technical traders.
Nike is trading below the 8-day and 21-day exponential moving averages (EMA), with the 8-day EMA trending lower than the 21-day, both of which are bearish indicators. Nike is trading above the 200-day simple moving average (SMA), indicating that the overall sentiment is bullish. On Tuesday, the stock tested the level as support and rebounded.
The bulls want to see Nike rise above a resistance level at $150 and regain the eight-day EMA to negate another possible bearish flag pattern. If the stock can regain the levels as support, it has room to close the gap.
The bears want to see big bearish volume coming in and knocking Nike below the 200-day SMA and a support level at $145, or for the stock to slowly rise in an ascending channel to create a bearish flag. Below the $145 level, Nike has support at $139.
See more Benzinga
© 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.