At its low on Monday, the S&P 500 was down about 35%. For its part, Nike shares have fallen from a high near $105 in January to a low of $60 last week. That 43% loss outpaces the major U.S. indices with the global sportswear maker surely seeing a negative impact in sales from the coronavirus pandemic.
Investors don’t yet know the extent of that impact, which is why the stock has fallen so precipitously over the past few weeks. Now, we await a response from management to hear what’s going on with the company.
Will global sales be worse than expected? Are online sales helping to buoy revenue more than investors were expecting? Until we have some answers, we can’t make a trade.
Let’s look at the charts.
Trading Nike Shares
Long-term investors know Nike as a great brand with customers trusting the product for decades. All that goodwill does not vanish in a six-month span due to a global pandemic. Nike will be fine at some point, which will attract long-term investors after a 40% haircut.
However, traders are in the reaction business, not the prediction or buy-and-hold business. In other words, long-term investors may be comfortable buying a position and holding for years. But for traders, let’s wait to see the post-earnings reaction before taking a position.
For two consecutive weeks, Nike stock has tested down to the $60 area, where it has bounced higher. On a closing basis, it continues to hold the $65 area, which is the low from the 2018 fourth-quarter pullback.
On a continued move higher, let’s see if Nike can reclaim the 200-week moving average. That should be simple enough if earnings provoke a bullish reaction.
Above that and the $77.50 level is in play. This has been a notable level over the past 18 months, while the 38.2% retracement for the one-year range comes into play near this mark as well. Over $77.50 and the 100-week moving average near $83 is on the table.
On a move lower, see if Nike stock can hold the $65 mark. Below puts this month’s low at $60 on the table. While I don’t expect a move down to the $50 area, it’s possible if we get a very bearish reaction to earnings and if market-wide selling pressure increases in the coming days and weeks.