Nike Inc (NKE) Stock Has Lost Its Grip

Advertisement

Shares of Nike Inc (NYSE:NKE) are lower by roughly 5.50% for the week; much of the drop is on the back of the company’s latest earnings report earlier this week. Although NKE stock has shown plenty of resilience this year, the bigger picture shows a decisive intermediate-term downtrend that is — once again — coming to a potential vortex. Investors and traders should sit up and take notice.

NKE Stock: Watch Out, Nike Has Lost Its StrengthWhen Nike reported its latest quarterly results on Tuesday, it came in with a near-8% rise in top-line revenue. Earnings per share of $0.73 also rose versus the $0.67 per share the company earned in the same quarter one year ago and beat analyst expectations.

Things quickly took a turn for the worse, however, when the company showed weakness in future product orders, which, as usual, should be more important to analysts than the past.

After it was all said and done, NKE stock fell about 2% the following day and followed through with more selling yesterday, Sept. 29.

In many ways, Nike stock is a classic tale of a stock that rallied too steeply and now finds itself in a better mean-reversion or corrective phase. As I often point out, this is an inevitable process for just about any stock or asset after it reaches its apex at too steep of an ascent.

NKE Stock Charts

On the multi-year weekly chart, I drew in the three stages of the rally in NKE stock since 2009. A steep but orderly incline off the 2009 lows turned into a steeper incline from 2013 through August 2015. From there, a final blow-off phase occurred that took the Nike stock into a vertical overshoot mode.

Since topping out in late 2015, NKE stock has now broken below multi-year trend support, and below both of its 50- and 100- week simple moving averages (yellow and blue lines respectively). The series of lower highs since late 2015 is visibly pushing the stock lower and now it would take a serious bullish reversal on at least a weekly closing basis to give any hope for a turn back higher anytime soon.

093016-NKE-stock
Click to Enlarge

On the daily chart, we see that because of the week-to-date selling spree, NKE stock has, once again, arrived at horizontal support that spans back to the first half of 2015 (i.e., around the low $50s).

From here, while Nike stock may be oversold in the intermediate-term, the continued fading of any rally since late 2015 certainly looks to be wearing on the bulls, and this ultimately could lead to a trap door effect where NKE stock snaps below horizontal support and into the $46 to $48 area.

093016-nke-stock-2
Click to Enlarge

Traders, stay vigilant on Nike stock, as it does not pay to try and catch a falling knife until the price begins to show us otherwise.

Like what you see? Sign up for our daily Beat the Bell e-letter and get Serge’s investment advice delivered to your inbox every morning! Download Serge’s Free Special Report: 6 Keys for Successful Trading and Investing.

More From InvestorPlace


Article printed from InvestorPlace Media, https://investorplace.com/2016/09/nike-inc-nke-stock-lost-its-grip/.

©2024 InvestorPlace Media, LLC