The chart of Nike Inc. (NKE) had been forming a fairly constructive pattern of higher highs and higher lows since bottoming out around $70 in early August. While a disappointing earnings call this week caused a sudden gap lower for NKE, we could be setting up for the next leg higher as this long-term recovery story continues. Before this week’s downside price gap, it’s worth noting that Nike was testing a major resistance level into last week. The $90 price point represents a 38.2% retracement of the December 2023 to August 2024 downtrend, and also lines up fairly well with significant price lows in 2023 and 2024. To add to this “confluence of resistance,” we can also see the 200-day moving average looming large, currently sitting just above $91. For the bull case to continue from here, NKE would have to power through that resistance range and show upside follow-through into at least the mid-90’s. This week’s pullback brought Nike down to just above trendline support based on the August and September swing lows. So even though the gap lower was sudden and unfortunate, the price still remains within a well-formed uptrend phase. In terms of price momentum, the RSI is still holding above 40, which is more common in bull phases than bear phases. As long as the RSI remains above this 40 threshold in the coming days, I would be comfortable labeling this as a pullback within an established uptrend. The weekly chart can provide some additional context as to what the recent upswing means relative to the long-term trend for Nike. The long-term trend has been decidedly negative for NKE, with price remaining below the 150-week moving average since Q2 2022. Nike also sits below a downward-sloping 40-week moving average, which is essentially the same as the 200-day moving average on the daily chart. So while the long-term trend has been firmly negative, a recent bullish signal on the weekly PPO indicator suggests that this may be the beginning of a recovery phase. We have seen four such signals on the weekly chart of NKE since the COVID low in 2020, and in three of those four instances we’ve witnessed a strong rally in the following months. Recent bullish signals in 2022 and 2023 resulted in a retest of the 150-week moving average, which would imply upside for NKE to around $105 assuming a similar uptrend phase. So while the short-term gap lower this week for NKE certainly drives home the downside risk for this struggling footwear company, the long-term charts suggest this may just be the beginning of a more constructive trend. -David Keller, CMT marketmisbehavior.com DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
