Nike beat on earnings and revenue estimates, but the quarter wasn’t flawless. Now shares sit on must-hold support.
Nike (NKE) – Get Nike Inc. Report stock looked like it might rally on Tuesday morning, but the stock has since reversed its early post-earnings gains.
Shares opened lower on June 28 by 2%, but then turned around and went positive. At the high, shares were up more than 3% on the session.
Nike delivered a top- and bottom-line earnings beat, but below the surface, there were some issues. Margins came in below expectations and earnings declined slightly year over year.
To help offset some concerns, the company even announced an $18 billion buyback plan.
Many investors feel like, “All things considered, Nike had a solid quarter.” And you know what? They’re right. It was a good quarter, but now the stock is moving lower.
Coming into the report, shares were down about 37% from the all-time high. The $103 to $105 area has been stout support. Will it hold again?
Trading Nike Stock
Weekly chart of Nike stock.
Chart courtesy of TrendSpider.com
Look at how important the $103 to $105 area has been for Nike stock.
Not only is this level recent support, it’s the 61.8% retracement as we measure from the all-time high down to the Covid-19 low in March 2020. Additionally, the $105 area is also a major breakout area, which was resistance before and after the covid selloff.
To hold this zone would be considered a big win for the bulls, in my view. If this zone is lost, it almost immediately opens up the potential for it to test $100 and potentially break below it.
If $100 does not hold as support, $91 may be in play, which is the 161.8% downside extension from the June high down to the May low.
Below that and the 78.6% retracement stands out near $85. Based on current price action, it does not seem like the covid low at $60 is on the table, although in a prolonged bear market, that could become the case.
For now, $100 to $105 is the level to hold and investors don’t need to panic until that observation becomes false.
On the upside, the 200-week moving average has been resistance over the last few weeks, while the 10-week moving average has active resistance. If Nike can hold $100 to $105 and clear these measures, we could be looking at a push up into the $120 to $125 zone.
The quarter may not have been too bad and Nike may be a great long-term business. In fact, I believe both of those are true. However, the charts are telling us a different story at the moment and at the very least, that story preaches caution until resistance is cleared.
