Nike (NKE) - Get Report remains the premier retailer of athletic equipment and popular iconic footwear. The company has beaten earnings-per-share estimates for four quarters in a row, but the stock has suffered nonetheless.
The stock set its all-time intraday high of $68.19 on Dec. 23, 2015, but weak earnings guidance that day led the stock into bear market territory during 2016. Nike is the worst-performing stock in the Dow Jones Industrial AverageI:DJI this year.
Earnings are expected to be reported on Dec. 20. Analysts expect the company to earn 43 cents a share after the close that day.
At the time of the December 2015 high, the first swoosh down put the stock as low as $53.64 on Feb. 8, then the stock began to rebound with the market. The 2016 high occurred on March 22 with a high of $65.44. This was the day of a negative earnings reaction after the closing bell, and the stock gapped lower on March 23.
The second swoosh lower bottomed at $51.48 on June 27, which corresponded with the market's post-Brexit low. The next earnings report was released on June 28 and this one helped fuel a rally. This time the stock rallied to a secondary high of $60.33 on Aug. 24. This was above its 200-day simple moving average, but when this key level failed to hold, the third swoosh lower began.
The downside accelerated following an earnings warning on Sept. 27 and the stock set its 2016 low of $49.01 on Nov. 2. The stock is up slightly since then, setting the stage for next week's earnings.
The daily chart shows the stock below a "death cross" since April 13 when the 50-day simple moving average declined below the 200-day simple moving average indicating that lower prices lie ahead. This proved to be a correct technical signal.
The weekly chart shows a ray-of-hope as this Nike could end the week with a positive weekly chart.
The weekly chart shows a red line through the price bars, which is the key weekly moving average (a five-week modified moving average). The green line is the 200-week simple moving average considered the "reversion to the mean."
The study in red along the bottom of the charts is weekly momentum (a 12x3x3 weekly slow stochastic), which scales between 00.00 and 100.00, where readings above 80.00 indicates overbought and readings below 20.00 indicates oversold.
A negative weekly chart shows the stock below its key weekly moving average with weekly momentum declining below 80.00 in a trend towards 20.00. A positive weekly chart shows the stock above its key weekly moving average with weekly momentum rising above 20.00 in a trend towards 80.00.
Here's the daily chart for Nike.
Courtesy of MetaStock Xenith
Nike closed Wednesday at $51.79, down 17.1% year to date, and in bear market territory 24.1% below its Dec. 23, 2015 high of $68.19. The stock has rebounded by 5.7% since setting its 2016 low of $49.01 set on Nov. 2.
The key feature of the daily chart for Nike is the "death cross" confirmed on April 13 when the stock closed at $59.58. With the 50-day simple moving average below the 200-day simple moving average the stock would likely trade lower and it did to a low of $49.01 set on Nov. 2. When a stock is below a "death cross" the suggested investment strategy is to sell strength to the 200-day simple moving average. This was doable between on Aug. 23 when this average was tested at $59.40.
Since bottoming at $49.01 on Nov. 2, the stock has moved sideways to up and at Wednesday's close of $51.79 is above the 50-day simple moving average of $51.23.
Here's the weekly chart for Nike.
Courtesy of MetaStock Xenith
The weekly chart for Nike will shift to positive given a close on Friday above its key weekly moving average of $51.69. The stock is well above its 200-week simple moving average at $46.72. The weekly momentum reading is projected to rise to rise to 25.69 up from 21.57 on Dec. 9.
Investors looking to buy Nike should do so on weakness to $46.41, which is a key level on technical charts until the end of December. This week's high of $53.21 is close to my annual pivot of $53.48. Investors looking to reduce holdings should consider selling strength to $66.11, which is a key level on technical charts until the end of 2016.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.