How Far Can Nike Run After Hitting New Highs on Earnings?

Nike is running to new all-time highs after the company reported better-than-expected earnings. Let's look at the charts.
Author:
Publish date:

It’s a tough start to a holiday-shortened week on Wall Street, but not for Nike  (NKE) - Get Report.

Shares were up about 5% on Monday and were up as much as 7.9% and hitting new all-time highs. The rally comes after better-than-expected earnings.

Nike reported second-quarter earnings of 78 a share, beating analysts’ expectations of 63 cents. Revenue of $11.2 billion beat estimates by more than $600 million and grew 8.8% from the same period a year ago.

Digital sales and momentum in China helped drive the beat.

At a time when there are questions about the consumer and there is weakness in retail sales, Nike continues to buck the trend. 

Interestingly, the company reported after the close on Friday, a rarity among most public companies. But it’s still being rewarded for its quarter on Monday. Let’s look at the charts to see just how far Nike can run.

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

Daily chart of Nike stock.

Daily chart of Nike stock.

Ever since Nike gave investors that solid breakout in July, the stock has been on a nearly unstoppable run. With Monday’s rally, there’s a bit of indecision showing on the charts, though.

A big part of that is likely due to the volatility we’re seeing in various indices and assets. While Nike’s reaction is bullish, there seems to be a hesitancy to bid it up too much.

On the upside, bulls need to see Nike trade up through the day’s high, at $147.95. Above that opens the door to the two-times range extension near $151.

If Nike takes out this level and maintains its trend, it could put a longer-term target of $180 in play, near where the stock finds its 261.8% extension.

On the downside, I’d like to see Nike hold the $140 area. That area had been resistance ahead of earnings and holding it after the initial pop would bode well for bulls. It’s always encouraging to see former resistance turn to support.

Should it fail, it puts the $137 to $139 area in play with the 21-day and 10-day moving averages, respectively.

Below that and Nike could probe the lower $130s, with the 50-day moving average currently near $131.50. In that area, it also has the 161.8% extension near $133.80 and a volume weighted average price (VWAP) measure near $130.60.

Here’s the bottom line: Watch $148 on the upside and $140 on the downside.