Athletic footwear and apparel giant Nike Inc.  (NKE - Get Report) set a fresh all-time intraday high of $88.59 on Tuesday, March 19, just as college basketball fans were polishing their bracket choices (though it closed down nearly 1.2% on Wednesday to $86.69). Setting further new highs throughout March Madness is not a slam-dunk. My call is to reduce holdings as its weekly risky level at $88.48 has been tested. 

Nike suffered a bear market decline of 22.6% from its 2018 high of $86.04 set on Sept. 21 to its Dec. 20 low of $66.53. Since then, the stock is in bull market territory, 31.8% above the low. The daily chart shows a "golden cross," but the weekly chart warns that the stock has become an "inflating parabolic bubble."

Analysts expect Nike to earn 62 cents to 68 cents a share when the company reports after the closing bell on Thursday, March 21. Nike is not cheap fundamentally as its P/E ratio is 34.31 with a dividend yield of 1.00%, according to Macrotrends. Wall Street believes that their quarter ended in February will continue to show sales momentum. I would be cautious on this outlook as one of their growth areas is in China, and recently we learned that the Chinese economy is slowing. Analysts from Canaccord Genuity say that supply-chain issues for Adidas ADS benefits Nike. They rate the stock a buy with a $96 price target.

The Daily Chart for Nike

Courtesy of Refinitiv XENITH

The daily chart for Nike shows that the stock had a price gap higher on June 29, following a positive reaction to earnings. This led the stock to its 2018 intraday high of $86.04 set on Sept. 21. From its high, the stock fell by a bear market move of 22.6% to its Dec. 20 low of $66.53. The stock closed at $74.14 on Dec. 31, which was an important input to my proprietary analytics.

The New Year began with semiannual, annual and quarterly risky levels at $79.05, $81.19 and $84.34, respectively. The stock closed above $79.05 on Jan. 17, then the $81.19 annual level became a pivot (or magnet) between Jan. 22 and Feb. 4, setting the stage for the move up to the quarterly level, which became a pivot (or magnet) at $84.34 between Feb. 12 and March 8. The close of $85.73 on Feb. 28 was the latest input to my analytics; its monthly value level for March is $80.65. The weekly risky level at $88.48 was tested at the all-time intraday high of $88.59 set on Tuesday, March 19.

The Weekly Chart for Nike

Courtesy of Refinitiv XENITH

The weekly chart for Nike is positive but overbought with the stock above its five-week modified moving average of $84.25 and well above its 200-week simple moving average or "reversion to the mean" at $62.58. This key average was last tested as a buying opportunity during the week of Oct. 20, 2017, when the average was $51.46. The 12x3x3 weekly slow stochastic reading is projected to end the week at 91.52, well above the overbought threshold of 80.00. With a reading above 90.00, the stock has become an "inflating parabolic bubble."

Trading Strategy: Buy weakness to its quarterly, annual, monthly and semiannual pivots and value levels at $84.34, $81.19, $80.65 and $79.05, respectively, and reduce holdings on strength to its weekly risky level at $88.48.

How to use my value levels and risky levels:

Value levels and risky levels are based upon the last nine weekly, monthly, quarterly, semiannual and annual closes. The first set of levels was based on the closes on Dec. 31. The original quarterly, semiannual and annual levels remain in play. The weekly level is changed each week; the monthly level was changed at the end of January and February. My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in. To capture share price volatility, investors should buy on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before its time horizon expires.

How to use 12x3x3 Weekly Slow Stochastic Readings:

My choice of using 12x3x3 weekly slow stochastic readings was based on back-testing many methods of reading share-price momentum with the objective of finding the combination that resulted in the fewest false signals. I did this following the stock market crash of 1987, so I have been happy with the results for more than 30 years. The stochastic reading covers the last 12 weeks of highs, lows and closes for the stock. There is a raw calculation of the differences between the highest high and lowest low vs. the closes. These levels are modified to a fast reading and a slow reading and I found that the slow reading worked the best. The stochastic reading scales are  between 00.00 and 100.00, with readings above 80.00 considered overbought and readings below 20.00 considered oversold. Recently I noted that stocks tend to peak and decline 10% to 20% and more, shortly after a reading rises above 90.00, so I call that an "inflating parabolic bubble" as a bubble always pops. I also call a reading below 10.00 as being "too cheap to ignore."

How Much Money Will I Need to Retire?

Want to learn about retirement planning from some of the nation's top experts? Join TheStreet's Robert "Mr. Retirement" Powell live in New York on April 6 for our Retirement Strategies Symposium. For a limited time, tickets are available for $99 for this full-day event. Check out the agenda, learn about the speakers and sign up here.

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.