First up this week is athletic apparel giant Nike (NKE), a stock that's been enjoying a sustained rally of its own for the last six months; since late September, shares of Nike have rallied more than 21%. But that rally has been very well-defined within a channel -- and now, that channel is creating a trading opportunity in shares.
Over the course of those six months, Nike has touched its trend line support level (the lower boundary of the channel) six times. Each time, it's found support at that line, and bounced higher within the channel.
Now, with NKE testing trend line support again this week, traders could be seeing an optimal entry opportunity before shares make their way back up the channel.Here's the key: It's absolutely essential to wait until after the bounce happens before being a buyer. Support levels do eventually fail, so waiting for a bounce off of trend line support confirms that there's still demand below that line. After NKE bounces higher for one session, I'd recommend keeping a protective stop just under the 50-day moving average. Nike was one of Goldman Sachs' Consumer Stock Best Buys for 2012. Follow @stockpickr
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