NEW YORK (Real Money) -- Just because I favor Under Armour (UA) as a long-term holding doesn't mean there isn't room for a trade on Nike (NKE) from time to time. Right now, NKE is setting up to possibly be one of those times.
Nike is pushing up against price resistance on the daily chart at $105. The recent one-month dip looks like nothing more than consolidation from the recent push higher as the stock moved from $95 up to this $105 level over the previous two months. The dip, and subsequent recovery, have created symmetry here.
The approximate 33% pullback keeps to many practiced trading theories, so look for a push over $105 to be bought. The minimum target would be the depth of the cup plus $105, while the maximum target would be $105 plus the previous run-up prior to the cup. Therefore, $108 for the minimum target and $114 on the maximum.
Volume has increased a bit recently, but ideally there would be a greater surge with a price breakout. Recent breakouts have all seen the Commodity Channel Index (CCI) push well over 100. Yesterday, saw the CCI close over 100 for the first time in a month. This is another bullish sign. We simply need price to trigger now.
The weekly chart is currently bullish, but my expectations here are a bit more tempered. The stock looks buyable as long as it remains in the current price channel. Any weekly close below $103 is a yellow flag, with $100 being a red flag. That's not a lot of room to the downside, hence the tempered expectations. With that being said, Nike only looks about halfway through this current run. The upside target here is $116, which rhymes well with the daily chart.
After a strong run in the second half of 2014, Nike pulled back in a bullish flag pattern. Again, we see a consolidation pattern after a strong push higher just like the daily chart. The target here is derived by adding the length of the previous bullish move to the lowest low of the bull flag. Minimally, Nike should move about one-third of the previous move added to the top of the flag. This only sets us up with a target of $106.50, though -- another reason why my longer term expectations are a bit tempered.
In the end, I think using the midpoint of both the daily and weekly charts is the most reasonable expectation, which targets $111 on a breakout above $105. I would anticipate a three- to six-week time frame with the shorter end being more likely. Nike has an active options market, so the use of calls and call spreads here could limit risk. Any close under $103, on either chart, is a yellow flag and anything under $100 means the sidelines for my bullish thesis.
"Wait, don't anticipate" is the slogan for Nike shares. Wait for the close over $105 for entry rather than anticipating it will happen.
Editor's Note: This article was originally published at 9:30 a.m. EDT on Real Money on June 18.