Dow component Nike, Inc. (NKE) has posted no upside in the past year after lifting into market leadership with a 72% 11-month rally wave that topped out in the mid-$80s in September 2018. Heavy exposure to China through local factories and goods entering the United States have held back the sports apparel giant, but long-term remedial steps to reduce dependence on the Asian nation are keeping a floor under the stock price.
The company has been shifting operations into Vietnam in recent years, bypassing tariffs implemented on Sept. 1 and those scheduled for December. However, President Trump has also threatened to impose tariffs on Vietnamese goods, so Nike's exercise could eventually backfire. At least for now, shareholders are hanging tough while waiting to examine the trade war impact on quarterly results.
Price action looks constructive in the long-term view, with a complex consolidation pattern that could eventually yield new highs. Accumulation readings have also held close to all-time highs, although the stock has posted three steep declines so far in 2019, all related to presidential tweets or tariff developments. Fortunately for bulls, downdrafts have pounded out support in the upper $70s, generating a potential springboard for a strong trend advance.
NKE Long-Term Chart (1992 – 2019)
A powerful uptrend topped out at a split-adjusted $2.82 in 1993, yielding a steep decline, followed by a recovery wave that mounted resistance in 1995. The rally wave ended below $10.00 in 1997, marking a price level that wasn't challenged for seven years while generating a decline that found support above $3.00 in 2000. It traded within those range boundaries into the second half of 2004, when a breakout into the double digits stalled immediately at $11.48.
Buyers returned in 2006, triggering a healthy uptick into the upper teens, ahead of a 2008 decline that found support at the 2004 breakout. The stock completed a round trip into the prior high in 2010 and broke out, entering a channeled advance that posted impressive gains that continued into the 2015 top in the upper $60s. Price action then settled into a broad triangular pattern, ahead of a late 2017 breakout that ran out of steam in the $80s after the first shot of the trade war.
Price action since that time has carved a potential rising wedge pattern, which is more likely to yield a breakdown than a breakout. However, just two highs and lows have been carved so far, forcing market watchers to pay close attention to price action at support in the $80s and resistance now rising through the $90s. It's also instructive to note that wedge lines now meet at the psychological $100 level, setting up a potential date with destiny in early 2021.
The monthly stochastics oscillator crossed into a sell cycle in May 2019 after reaching the overbought level, predicting at least six to nine months of relative weakness. However, this bearish signal may have failed with August's bullish crossover, although these mid-range turns often generate false readings. It's another wait-and-watch situation that may be dependent on midnight tweets and trade talk developments.
NKE Short-Term Chart (2017 – 2019)
Three 2019 downdrafts have found support at or near the narrowly aligned .382 Fibonacci rally retracement level and the 200-day exponential moving average (EMA) in the low $80s. Wedge support is rising into this confluence, highlighting the need for buyers to hold this level or risk a decline into the $70s. The on-balance volume (OBV) accumulation-distribution indicator posted an all-time high in July, revealing loyal sponsorship that heavily favors a bullish outcome.
The Bottom Line
Nike stock is struggling near rally highs, but broadly bullish volume readings now favor a breakout that reaches the triple digits.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.