Nike (NKE) - Get Report shares have pulled back to a key Fibonacci retracement level, and the price momentum and money flow indications are suggesting the stock is ready to rally ahead of its Dec. 20 earnings report.
Let's look at the technicals for Nike.
The pullback can be seen as a declining channel pattern on the weekly chart, which is currently retesting pattern support and the 38% retracement of the 2012 to 2015 range.
The stochastics oscillator is moving up and out of its oversold zone, and the accumulation/distribution line on this time frame is still below its 21-period signal average, but is leveling off.
The price action above retracement-level support on the daily chart has formed a rounded bottom below horizontal resistance in the $52.50 area, which is being retested this month. It was penetrated in Tuesday's session, but the price retreated and closed back below it, forming a high wick or upper shadow candle.
The broader market decline on Wednesday prevented a second breakout attempt, but the stock held above the rising slope of the basing pattern. Daily moving average convergence/divergence is overlaid on a weekly histogram of the oscillator and has moved above its center line on both time frames, and the relative strength index is tracking higher and is above its 21-period average.
The Chaikin money flow indicator has been steadily rising since the pattern low was made in November. It is above its signal line and is preparing to enter positive territory.
Nike is a long candidate after an upper candle close above horizontal resistance, using a trailing percentage stop. If the trade is triggered, holding it through the earnings announcement is a matter of one's risk tolerance level and overall trading plan.
This article is commentary by an independent contributor. At the time of publication, the author held no position in the stocks mentioned.