Shares of Nike Inc (NKE) are making some noise this week after the company unveiled plans for a self-lacing sneaker. This new adaptive technology could transcend basketball, running, soccer and a wide variety of other sports.
Nike plans to release an array of sneakers over the next few years with this type of technology, which could truly be a game-changer.
Earnings are due out Tuesday, and shares could be volatile depending on the results and the company’s outlook. Wall Street is expecting a profit of $0.49 a share on revenue of $8.2 billion.
The high estimate has NKE stock earning a profit of $0.54 a share on sales north of $8.3 billion. The low estimate has penciled in numbers of $0.46 a share on revenue of $8 billion. This means headline risk of a $0.05 beat or a $0.03 miss.
The company has topped analyst forecasts over the last four quarters by two cents, seven cents (twice) and three cents, respectively.
NKE Stock Chart
The chart below shows a possible bullish breakout developing following Thursday’s close above the 100-day moving average. The 200-day moving average has been in a solid uptrend since last November, and the 50-day moving average is starting to level out. The next layers of resistance are at $64-$65, with the December high north of $68. Rising support is at $63-$62.
The NKE stock near-term options are pricing a possible move of 5% or more in the stock into and after the earnings release.
The Trade for Nike
The NKE April $65 calls (NKE160415C00065000) rose 40% Thursday after closing Wednesday at 90 cents. Bullish traders could target these call options for further gains. Volume was heavy, as over 11,000 contracts traded hands. As of today, it traded at $1.20. If NKE shares clear $68.10 by mid-April, technically, these options will be worth at least $3.10 for a triple-digit return from current levels.
The NKE April $60 puts (NKE160415P00060000) fell 35% Thursday on volume a third lighter than the aforementioned call options. As of today, it’s priced at 98 cents. If NKE shares fall below $58 by mid-April, technically, these options will be worth at least $2 for a triple-digit return.
These options purchased together would create a strangle option trade for a combined cost of roughly $2.20, with breakeven points at $67.20 and $57.80. If NKE shares clear $70 or fall below $55 by mid-April, technically, the trade would return over 100%
I’m more bullish than bearish on Nike, and I will be looking at a possible trade.
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