The ascension in Nike (NKE) stock continued last week with the ubiquitous retailer tagging a new all-time high at $117.72.
What’s particularly impressive is the new high was reached despite the dismal backdrop of the broader stock market. Nike stock price has been a diamond in the rough, making it a perfect example of relative strength.
The minor pullback seen in Nike stock price late last week could be yet another in a long line of buying opportunities. Let’s head to the charts for a quick review of NKE’s technical posture and see if there’s a trade to be found.
The story of Nike stock has been a one-sided bullish tale with nary a mention of the bears. Sure, it has experienced the occasional downturn, but each bout of profit-taking has been shallow and short-lived.
NKE shareholders have been coddled. The price remains firmly entrenched in an uptrend perched above all major moving averages. Distribution, or high volume down days, have been absent, and the relative strength on the stock has been through the roof.
Really, what’s not to like?
Today’s pop confirms that dip buyers are still out in force, snatching up last week’s retracement right at the rising 20-day moving average.
The Nike Stock Option Trade
Aggressive traders looking for an unlimited reward play on NKE could buy the Oct $115 calls for $4.32. The risk is limited to the initial $4.32 debit and will be forfeited if Nike’s stock price sits below $115 at October expiration. The unlimited reward allows unfettered participation in any further upside in the stock over the coming months.
Conservative traders interested in a lower-risk, higher-probability play could buy the Oct $115/$120 call spread for $2.20. Since the spread involves selling a call option against the one we’re buying, the overall cost (and therefore risk) is reduced. The max loss is limited to the initial $2.21 debit. The max reward is limited to the distance between strikes minus the net debit, or $2.79, and will be captured if Nike stock price can rise above $120 by expiration.
As of this writing, Tyler Craig did not hold a position in any of the aforementioned securities.
