Nike Charts Warn of Weakness

NEW YORK (TheStreet) -- Nike (NKE) reported earnings Thursday night and projected higher sales for the coming year. The stock popped some 7% after hours despite a generally negative global outlook for most equities. With this kind of a report, should you be buying today?

I'll look at just two charts today to technically evaluate Nike. The first is the Trading Cube which is a reflection of the qualified trends for Nike, the sector it trades in (consumer discretionary) and the general market across all three time frames. It provides a snapshot view of qualified trend.

The way to read this graph is that the weakness in the general market and the sector are a drag against Nike. Both of those larger influences are bearish in their trends and that is a problem for most stocks including Nike.

Follow @StockAction on Twitter for market observations and investing ideas

Nike, despite all the good press and numbers, remains in a sideways trend on the short- and intermediate-term trends and it is unlikely that today's surge will change either of those trends. It would need to get up and over the $91 resistance zone to do so and that remains unlikely. Here is the weekly chart.

It is far more likely that, in this environment, resistance will hold for now and Nike will remain trapped in this large consolidation range between support and resistance zones as indicated on the weekly chart.

Unfortunately, for all the Nike fans, today's price surge is unlikely to be a reason to buy but instead to wait. If invested in the name as a core position, it's a time to take some gains near the top end of the range and to wait for a future decline to buy back. The only worrisome point on the chart is the high-volume magnet low, but that won't come into play unless the support zone is broken. If that were to happen, a revisit of that low would be reasonably assured.

Thanks for listening and until next time, just keep trading the charts.

>To order reprints of this article, click here: Reprints