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How to Buy This Dip in Nike

Nike shares are getting hit Thursday over concerns coming out of China. Let's look at the chart to see if this dip is a buying opportunity.

Nike  (NKE)  was taking it on the chin on Thursday, down more than 5% at the session low.

Shares have been under pressure following political concerns in China. The company made a statement regarding China’s treatment of Uighur Muslims, which drew the ire of China’s Foreign Ministry.

The news added to the recent weakness in Nike, which is working on its third straight daily decline. Shares have fallen more than 9% during that three-day stretch.

Further, shares were down almost 15% from last week’s high, which comes after the company reported earnings.

It was largely considered a mixed report, as Nike missed revenue estimates. This also helps explain the recent weakness in the stock.

However, Nike still earned analysts’ support following the quarter.

It helps that Nike is an incredible brand with a great business and loyal customers. It’s one of those stocks where bulls are natural buyers because the long-term trend remains so favorable.

Let’s look at the chart to see if this current dip is an opportunity as well.

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Trading Nike

Daily chart of Nike stock.

Daily chart of Nike stock.

Should investors buy this current dip? Down about 15% from the all-time high made back in December and it seems like a ripe enough decline for aggressive bulls.

Preferably though, we would get a dip down to the 200-day moving average. So far, buyers have stepped in enough to prevent that test from taking place.

For now, shares have fallen below its previous trading range, between $130 and $145. Until $130 is reclaimed, we have to be a bit more cautious in the intermediate term.

Buyers who like Nike can buy on a dip into the 200-day moving average, but they should be aware that more weakness is possible.

Specifically, a dip down to the 50-week moving average would send Nike down below $120 and mark shares about 20% off the highs. A slight overshoot could fill the gap near $117.20.

In short, dips into this area are likely an opportunity for long-term investors who understand more selling pressure could continue in the short term. More aggressive buyers will use today’s dip as an opportunity. Conservative investors should wait for a deeper dip into support for a better risk/reward setup.