Nike, Inc. (NKE) shares fell more than 3% in the second straight session after the company revealed plans to narrow its focus and introduce products more quickly. The leading apparel maker will focus on 12 key markets that represent about 80% of its sales in 2020 – New York, London, Shanghai, Beijing, Los Angeles, Tokyo, Paris, Berlin, Mexico City, Barcelona, Seoul and Milan – while developing methods to quickly deliver personalized products to consumers.

The market interpreted the move negatively, with shares falling about 2% the morning that the new plan – and an associated 2% cut of Nike's global workforce – was announced. Susquehanna analysts attributed the 2% cut in the workforce to the global consolidation move, which suggests that more cuts may materialize over the coming years as Nike trims its presence. This should help improve margins by reducing expenses, but revenue growth is the wild card. (See also: Nike Dips on Layoff Plans, Can Latest Strategy Revive Stock?)

Chart showing the year-to-date performance of Nike, Inc. (NKE) stock

From a technical standpoint, the company moved toward R1 resistance at $55.17 before moving sharply lower toward its lower trendline and S1 support at $50.54. The relative strength index (RSI) appears to be approaching oversold territory, but the moving average convergence divergence (MACD) suggests that the stock remains in a bearish downtrend. The descending triangle chart pattern appears to confirm these bearish sentiments.

Traders should watch for a breakdown from trendline and S1 support for a potential short position with a possible move to S2 support at $48.28. On the other hand, a rebound from these key support levels could lead prices back to the pivot point at $52.90. A bearish bias appears to be the most appropriate at these levels, with the negative MACD and weak RSI readings as well as the recent high-volume moves lower. (For related reading, check out: Can Nike Pull Off $50 Billion in Sales by 2020?

Chart courtesy of The author holds no position in the stock(s) mentioned except through passively managed index funds.

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