The chart of the day is Nike (NKE) - Get Report , which is a top global brand that is growth-oriented, pays a dividend of 1% per year and offers positive price action as it breaks above the former resistance level.
Investors should buy a position before the athletic-apparel company releases earnings after the close on Tuesday, and they should add to that position on any weakness. Be nimble though, and buy that fear, as top brands have a way of being well-bid during short-term periods when the stock misses expectations.
More than 50% of Nike's revenue comes from outside the United States, so if the dollar does break trend, the company's stock should benefit greatly.
As a reminder: My favorite and only fundamental factor for buying stocks is a pass/fail test of whether the company is a high-quality brand and has superior products or services that have global reach.
If the answer is yes, I move to the most important question of whether the current price action warrants owning it now. I have no interest in owning a brand if its stock chart shows that the market is voting "no."
There is no reason to fight the market or the clear supply/demand trend that isn't in an investor's favor.
Fundamental investors will say, "It's the story, the balance sheet, the free cash flow generation, the expanding margins," etc.
My answer is that the stock price will turn before the fundamentals do, not 100% of the time but most of the time. I try not to let my ego lead me where stocks are concerned, as that has never been a profitable strategy for me.
Trying to figure out what a company's stock will do on an earnings announcement is akin to gambling, so I won't do that. I hope Nike misses earnings estimates and the stock pulls back, which would give me even greater comfort in owning the stock for the long term.
Because the stock has already rallied over an important level, it is now in the buy zone.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.