Nike (NKE) shares have been making a series of lower highs and lower lows since the end of 2015, and the price action has formed a large declining channel. The stock price has recently penetrated the downtrend line of the channel and the pattern price projection targets a potential move back up to the all-time highs.

The long term uptrend from 2012 to the 2015 high can be seen on the weekly chart, along with the stair-step pullback that has defined the declining channel. The October low tested the nexus of the support line and the 38% Fibonacci retracement level of the nearly three year rally, and the bounce that followed has returned price to the channel top.

Momentum indications began improving at the beginning of the year, with the relative strength index crossing above its center line and moving average convergence/divergence making a bullish crossover. Chaikin money flow has been tacking higher and is at its center line, suggesting that the stock is under accumulation. The pattern price projection is measured by taking the height of the channel and adding it to the breakout point, and it targets an objective back near the all-time highs in the $67.00 area.

On the daily time frame, the retest of the channel support line can be seen as a rudimentary cup and handle formation with rim line resistance intersecting with the 200 day moving average at the $54.00 level. That resistance was taken out two weeks ago and the stock has continued on to break out of weekly channel resistance.

Moving average convergence/divergence has followed with a bullish crossover, and the vortex indicator, which is designed to spot early shifts in trend, has also made a positive green-over-red line crossover.

Money flow indications are leading the weekly readings and reflect strong buying interest this month. The relative strength indicator, however, is in an overbought condition and could be suggesting the stock needs to consolidate before continuing higher.

One long entry strategy would be to wait for a pullback and buy at a lower level, but there is the risk that the stock continues to rally and an opportunity is lost. It did pause briefly after the weekly trend line break out, not enough to reset the relative strength index or to be considered a consolidation, but it is hard to ignore the price action and the money flow reading. A better option is to buy at its current price and position an initial stop at a level that compensates for the higher entry point.

No position.

More from Investing

What is a Stop-Limit Order and When Should You Use It?

What is a Stop-Limit Order and When Should You Use It?

The Fed Should Wait and See: Cramer's 'Mad Money' Recap (Thursday 12/13/18)

The Fed Should Wait and See: Cramer's 'Mad Money' Recap (Thursday 12/13/18)

Delta Air Lines Slips on Lower 2019 Profit Forecast

Delta Air Lines Slips on Lower 2019 Profit Forecast

Starbucks Shares Gain as Investor Day Highlights China Growth Ambitions

Starbucks Shares Gain as Investor Day Highlights China Growth Ambitions

Adobe Tops Q4 Sales Forecasts, Sees $11.1 Billion in 2019 Revenues

Adobe Tops Q4 Sales Forecasts, Sees $11.1 Billion in 2019 Revenues