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How to Trade Nike After Shares Surge to Record Highs on Earnings

After consolidating for six months, Nike surges to all-time highs on better-than-expected earnings. Here's how to trade the stock now.

The markets might be mellow on Friday but Nike  (NKE) - Get Report sure isn’t. Shares were vaulting higher by 14% on better-than-expected earnings.

It’s one of the best days for Nike stock since March 20, when the company reported earnings in the heat of the COVID-19 selloff.

Profit margins expanded, while earnings and revenue came in above analysts’ expectations. Further, guidance for 2022 was above consensus estimates.

It was a blowout quarter as the company is seeing a robust recovery in its business as the world continues its return to normal.

Despite the low summer trading volume for the markets, Nike has already seen more than 30 million shares change hands before 1 p.m. ET.

It’s one of the biggest gainers on the day, as others like Virgin Galactic  (SPCE) - Get Report also vie for the top spot on investors’ radar.

Where can Nike stock go now after hitting new all-time highs?

Trading Nike

Daily chart of Nike stock.

Daily chart of Nike stock.

Just look at Friday’s candle to get an idea on the magnitude of this move. Shares surged higher coming into 2021, but topped out in December.

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While Nike stock made several attempts at pushing to new highs, all advances north of $145 were rejected, while the all-time high at $147.95 went unchallenged into mid-March.

Mid-March was the last push that bulls had before Nike stock embarked on a deeper pullback to the 200-day moving average.

With Friday’s surge, Nike broke out over downtrend resistance, as well as cleared all of its major moving averages. Lastly, the stock gapped over that difficult $145 to $148 resistance zone and the prior high.

So what now?

From here, it wouldn’t be weird to see Nike consolidate a bit. That said, the stock had been consolidating for the last six months prior to today’s move.

In that sense, we want to be bullish on this name. On a pullback, look to see if the prior resistance zone between $145 and $148 turns to support. That would be a bullish development. 

Further, dips to its short-term moving averages, like the 10-day, are likely to be buying opportunities for active traders.

On the upside, investors can make a push for the 161.8% extension up over $161.

Unless Nike stock really breaks down from here, the ball is in the bulls’ court.