Shares of Nike Inc (NYSE:NKE) stock have rallied about 14% alongside the broader stock market, rising from their late June lows up to last Friday’s intraday highs. Last Friday, however, NKE stock bumped into an area of notable technical resistance and promptly also marked its daily chart with a bearish reversal.
Active investors and traders may now have an opportunity to “fade” Nike stock lower for a trade after this most recent rally.
Before looking at the charts of NKE stock, there are two things of note:
- One of Nike’s key competitors, Under Armour Inc (NYSE:UA), is scheduled to report earnings on July 26, which could also have an impact on NKE stock.
- Last Friday, monthly equity options expired for the month of July, which may have adversely affected the price action on NKE stock that day. This is to say that although Friday’s price action in Nike stock was bearish, we still need further conformation to prove that Friday’s price action was indeed as bearish a signal as it looked.
Nike Stock Charts
Ever since NKE stock gave us a serious warning sign in late December 2015 with a major bearish reversal day and week, I have been cautious on the stock and a seller of rallies. I have not yet changed this posture as Nike continues to form a series of lower highs.
Looking at the multiyear weekly chart, we see that Nike stock in late June reached the lower end of its cone-shaped multiyear ascent and has since bounced back toward its flat-lining yellow 50-week simple moving average, which also matches up with an area of former support and resistance and could lead to a pause or another lower high in the stock.
On the daily chart, note that last week NKE stock completed a 50% retracement of the entire sell-off from its reaction highs in March down to the late June lows.
Finally, last Friday, Nike stock marked its chart with a bearish reversal where an intraday rally completely reversed. By day’s end, NKE closed at its very lows for the day. Again, considering last Friday’s options expiration day, there may have been some distortion in the price action due to options expiration games.
Nonetheless, NKE stock last week reached a technical confluence resistance zone that has importance both on its daily and weekly charts. A short-side stab at Nike could make sense. A first downside price target would be $56, while any strong bullish reversal back above last Friday’s highs would serve as a stop-loss signal.
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