NEW YORK (TheStreet) - Nike (NKE) reports quarterly earnings after the closing bell on Thursday and after nine consecutive quarters of beating analysts' estimates it may be difficult to hit the earnings ball out of the park given the global economic slowdown and strong dollar.
Nike is one of the new members of the Dow 30 and will report earnings for the quarter ending in November. Nike is the first of the 30 companies in the Dow Jones Industrial Average to kick off earnings season for the current quarter.
Since Nike sells athletic footwear, apparel and equipment to consumers worldwide, investors should be aware that global demand could be a challenge and that the company faces the risk of converting sales in foreign currencies into dollars on the balance sheet.
Analysts expect Nike to earn 70 cents a share, up from 59 cents in the year-earlier quarter. Sales are projected to rise to $7.15 billion from $6.43 billion. The Black Friday release of the latest LeBron James signature basketball shoe could provide a boost, particularly on North American sales.
Let's look at the daily and weekly charts first, then the investment profile with exit strategies given the overbought reading on the weekly chart.
Here's the daily chart for Nike.
Courtesy of MetaStock Xenith
The daily chart for Nike ($94.50) shows that the stock broke out above its 200-day simple moving average (green line) back on Dec. 12, 2012, then at $50.13. The stock closed 2013 at $78.64, up 57%.
In 2014, the stock dipped 11% to as low as $69.85 on Feb. 5, then resumed its solid rally. Note how the 200-day SMA provided several buying opportunities between April 7 and August 8.
Nike beat earnings estimates for the ninth consecutive quarter on Sept. 25, and the stock gapped 10% higher on Sept. 26. It continued its strong momentum, setting an all-time intraday high at $99.76 into Nov. 28. From its 2014 low to its 2014 high, Nike gained 43%. Wednesday's close was above the stock's 50-day simple moving average at $93.83.
Here's the weekly chart for Nike.
Courtesy of MetaStock Xenith
The weekly chart for Nike shows that the stock has been above its 200-week simple moving average (green line) since July 2009, when this average was $26.36. In March 2008, Nike traded as high as $35.30 before the crash of 2008. The stock is thus 183% above its pre-crash high.
The weekly chart is neutral but overbought, with its key weekly moving average at $94.65, and 200-week SMA at $60.34.
Here's how to trade Nike.
Investors looking to buy Nike ($94.50) on weakness should enter a "good 'til canceled" limit order to buy weakness to a key technical level at $83.05.
Investors looking to book profits on Nike should enter a "good 'til canceled" limit order to sell at a key technical level at $98.15. If the stock is below its key weekly moving average at $94.65 at Thursday's close, that would be a technical warning for the earnings report.
TheStreet Ratings team rates NIKE INC as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:
"We rate NIKE INC (NKE) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share, increase in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
You can view the full analysis from the report here: NKE Ratings Report