The last time our objective decision support engine (DSE) generated a forecast for Nike (NKE), we posted this analysis on TheStreet, warning the company's "shares are about to move sharply lower." That was on Dec. 24. Nearly six months and a week later, DSE has just generated the opposing signal, delivered to members of our DSE Alert service to cover in the low $50s, as the largest bounce since the peak is now due.
Specifically, the $53.50 to $56 zone is where short sellers should accept profits, before they evaporate, as the summer's activities, not to mention Olympics exposure, should allow at least a bounce toward $60, if not $70.
This is the monthly bar chart, which reflects a 2:1 split since the piece we published on Christmas Eve. However, the pattern is identical, and the target has been achieved. Therefore, only buying actions are indicated now, whereas only selling actions were indicated up near the highs.
In December, selling actions applied to long exposure were advised to take you to the sidelines, or applied to flat exposure to take you to short. Now, buying actions applied to short exposure will take you to the sidelines (banking profits), or applied to flat exposure will take you long.
Notice the stochastics study, in the lower pane of the graph, has returned to neutral (around 50%)? The weekly version of this indicator, not shown, is at deeply oversold extremes, near the 10% threshold. This is where rallies are typically begun.
Also, the recent low in price briefly broke under the lower 2 standard deviation band (olive/gold line), which controls 95% of normality. This hasn't happened since 2012, where a bottom occurred that was followed by an explosion in price from the low $20's to the mid-$30s, initially, before eventually reaching the high $60s in 2015.
The message of the DSE is that this is not the place to be betting the downside of NKE. Au contraire! This is the time to buy.
The pink box around $60 highlights the minimal target of the forecasted rise, but the red box around $70 is where the pattern off the 2009 low would create the most aesthetic symmetry.