Nike - How to Trade It When Sports Apparel Giant Reports Earnings

Nike has done well lately, trading just below its all-time high. Will earnings propel it over this mark?
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Nike  (NKE) - Get Report was down about 1% on Wednesday as the broader market came under similar pressure.

However, unlike most companies, Nike’s quarterly results are due up this week, with the company reporting earnings after the close of trading Thursday.

The stock continues to perform quite well, particularly for an apparel and retail company. For the most part, this group has struggled, save for a few strong brands like Lululemon Athletica  (LULU) - Get Report and essential retailers like Target  (TGT) - Get Report and Walmart  (WMT) - Get Report.

For Nike’s part, it does have a strong brand with loyal customers. That’s why shares are down less than 5% from the all-time high.

Investors are anxious to hear from management and find out how strong online sales were in the quarter and whether customers are flocking back to open stores.

Ahead of the quarter, let’s look at how the charts are setting up.

Trading Nike Stock

Daily chart of Nike stock.

Daily chart of Nike stock.

Like almost every other stock, Nike was hammered from mid-February through mid-March. Unlike almost every other stock though, Nike reported earnings amid that mayhem.

The company reported a top- and bottom-line beat for its fiscal third-quarter results on March 24th. It helped spark a three-day 34% rally, launching Nike stock from the low-$60s back into the mid-$80s.

Shares retested the highs earlier this month before pulling back. For now, Nike continues to hold up above the 20-day moving average, as bulls remain in control.

On the upside, investors want to see Nike break out over $105 and close above its current all-time high up at $105.62. Above that opens the door to the 123.6% extension from the March low to the February high, at $115.74.

On the downside, the 20-day moving average will be lost if there is any sort of meaningful pullback. However, it gives investors an opportunity to see if some larger levels of support hold.

Specifically, I want to see if the $95 level — the breakout mark from October — can hold as support. Below puts the 50-day and 200-day moving averages in play. If these marks don’t hold, it puts more downside potential on the table and will likely give traders some pause.

They will then have to look at how Nike stock handles the 61.8% retracement at $87.79 and whether it fills the May gap at $86.77.

To keep it simple, see how Nike stock handles the $105 to $106 area on the upside and the $92 to $95 area on the downside.