How to Trade Nike When It Reports Earnings - TheStreet

How to Trade Nike When It Reports Earnings Tuesday

Nike has put together a super run but has been cooling off lately. Let's look at the key levels for Nike's earnings report.

Nike  (NKE) - Get Report shares have been quite strong in the latter part of summer. Shares ripped about 20% higher from the end of July to Sept. 2.

That made it one of the best performers in August. With that said, Nike has been under pressure ahead of earnings, with the company scheduled to report its quarterly results after the close of trading on Tuesday.

After a quick burst to the upside - while the broader market was taking it on the chin - investors have seen a quick unraveling in Nike’s share price.

Should the stock close lower on the day it will make the fifth straight daily session in which it has done so. At Monday’s low, Nike was down 7.25% from its high on Sept. 15.

With sports getting back in motion - ranging from kids leagues to pros - Nike has better prospects now than it did a few months ago. Can the stock keep up its recent momentum?

Nike is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells NKE? Learn more now.

Trading Nike Stock

Daily chart of Nike stock.

Daily chart of Nike stock.

Nike stock is putting in a higher low vs. this month’s low, currently at $110.21 from the prior pullback. However, with earnings on deck, that mark is not my top concern.

Instead, notice how Nike shares are losing the 20-day moving average. A close below that is not a bullish development in the short term and leaves questions for how the stock will perform tomorrow ahead of the quarterly report in the evening.

Will it reclaim the 20-day moving average ahead of the print? Will Nike continue lower?

Ultimately, it doesn’t matter that much - the price action will just be noise. The move we want to see will come on Wednesday after the report is out. I’ll also want to see how Nike closes by the end of the week.

On the upside, I want to see Nike reclaim the 20-day moving average and hold that mark after earnings. I also want to see it reclaim and hold last week’s low at $114.49.

Above opens up a run to $120, where Nike previously topped out. A move to new all-time highs puts the 138.2% extension in play at $122.34, followed by a longer term price target of $133 at the 161.8% extension.

On the downside, I’m looking for a dip to the $105 to $106 area. There Nike stock will find the prior 2020 highs, which led to a powerful breakout in August. Further, the 50-day moving average comes into play near the top of that range.

Below could put the $100 level and 200-day moving average on the table.