Chart of the Day: Nike Earnings Could Trigger New Rally, Despite Recent Dip
Investing.com | Mar 21, 2019 10:42
Nike (NYSE:NKE) (NYSE:supply chain shortage that is expected to hit its growth in the first half of the year.
With a complex and conflicting fundamental picture, we turn to the supply-demand balance for more clarity.
Nike Daily Chart
As opposed to the broad market, Nike is in an unequivocal bull market after posting a record close of $87.84 on March 18 and an all-time high of $88.59 on March 19. The decline of the last two days leaves the price, which closed yesterday at $86.69, still above the previous peak of Sep. 21.
While the RSI provides a negative divergence with momentum, suggesting that prices will follow lower, the 50 DMA crossed above the 200 DMA, as the price reached new heights, triggering a golden cross, the most famous technical buy signal. The RSI divergence may be tolerable from a risk perspective, considering it remains above a major support, the November-December congestion below $80.
Though we remain bearish on the medium-term trend of the overall market, even if begrudging the S&P 500 Index rising above its October peak, we are bullish about Nike. We should note, however, that a general downturn is likely to drag on Nike as well.
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Conservative traders should stay clear until the RSI turns around, with an upside breakout of its descending channel.
Moderate traders may enter a long position, after the earnings release rally pulls back in a correction.
Aggressive traders may risk a long position before the release, counting on the statistical bullish outlook after yesterday’s selloff remained above the September peak, demonstrating continuing demand.
Trade Sample
- Entry: $87
- Stop-Loss: $84, March low
- Risk: $3
- Target (NYSE:TGT): $96
- Reward: $9
- Risk-Reward-Ratio: 1:3
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