Dow component Nike, Inc. (NKE) reports fiscal fourth quarter earnings after the markets close on Thursday, June 27, with Wall Street analysts expecting earnings per share (EPS) of $0.66 on revenue of $10.15 billion. The stock sold off more than 6% after the company beat third quarter profit estimates and met revenue expectations in March, held down by weak growth in North American sales. It recovered those losses quickly, lifting to an all-time high at $90.00 in April.
The stock has struggled since that time, failing a major breakout above the 2018 high in the mid-$80s before dropping to a four-month low. A bounce into June has just reversed at new resistance generated by the failure, raising the odds for a sell-the-news reaction after the release. Even so, the quarterly confessional will dovetail with this week's Trump-Xi meeting at the G-20 summit, which is likely to move all markets affected by worldwide trade tensions.
NKE Long-Term Chart (1996 – 2019)
A multi-year uptrend stalled at a split-adjusted $2.82 in 1992, yielding a steep decline, followed by a 1996 breakout that posted sold returns into the 1997 high at $9.55. That marked the highest high for the next seven years, ahead of range-bound price action with support near $3.50. A 2004 breakout tested new support for two years before ejecting in a steady uptrend that topped out in the upper teens at the start of 2008.
The stock fell to 1997 support during the economic collapse, bottoming out in March 2009, ahead of a steady uptick that completed a round trip into the 2008 high in 2010. The subsequent breakout eased into a narrow rising channel and stayed within those boundaries until topping out at $68.19 in December 2015. Subsequent price action carved a well-organized symmetrical triangle pattern into a November 2017 breakout that posted new highs in 2018 and 2019.
The monthly stochastic oscillator crossed into a long-term buy cycle in January 2019 and reached the overbought level in March. It has now turned lower in a long-term sell cycle that predicts relative weakness will continue through the third quarter. This technical set-up suggests that the stock will turn sharply lower after the current pullback to resistance, perhaps testing the 2018 low in the mid-$60s.
NKE Short-Term Chart (2015 – 2019)
A Fibonacci grid stretched across the uptrend that started at the deep August 2015 low reveals an Elliot five-wave rally pattern that may have ended at the April 2019 high. The sell-off into December is perfectly situated at the 50% retracement, offering a potential target for the current downswing. More importantly, the pattern increases vulnerability into the upper $50s, which would require a breakdown through 2018 support.
Fortunately for bulls, the on-balance volume (OBV) accumulation-distribution indicator highlights a loyal shareholder base, mounting the 2018 high with price in the second quarter of 2019. OBV is hovering right near the highest high of the decade ahead of this week's confessional, telling us that investors will hang tough through the report. Despite this tailwind, Nike's fate depends more on political discussions on the other side of the world and less on quarterly results.
The bearish technical outlook will improve greatly if the stock pushes above this week's high after the news and reinstates the February breakout. Conversely, the more bearish outcome is likely if the news triggers a decline that undercuts the June 17 low at $82. That down-tick would bring the 200-day exponential moving average (EMA) into play for the second time this year, increasing the odds for a breakdown that reaches the 2018 low.
The Bottom Line
Nike stock failed the February breakout above the 2018 high in April and has now rallied back to resistance, raising the odds for renewed selling pressure after this week's earnings report.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.