The market suffered some early selling pressure but has bounced back from the early lows quite fast. Breadth is poor with around 1900 gainers to 4800 decliners which is primarily a function of too many stocks being extended. The market really needed a rest at the end of last week but refused to do so. The much needed consolidation is taking play now but there is still plenty of buying support.
I've made a few smaller sales and am waiting for some stocks to come in and set up again. I see no reason to be overly negative about the market here. It simply needs some rest and consolidation.
One interesting low priced stock I'm watching today is Histogenics (HSGX) . It spiked on Friday and is pulling back today. HSGX develops restorative cell therapy primarily for orthopedic use. It is expected to release Phase 3 clinic date in the third quarter of 2018.
Nike (NKE) stirred up some major controversy after announcing it will feature Colin Kaepernick in its new advertising campaign. Kaepernick is a lightning rod for the controversy surrounding the kneeling during the national anthem at NFL games. The polls show there is a deep division on the issue, so the question is whether or not this is a net positive for the stock.
Supporters of the move argue that Nike is an international brand with a focus on a youthful audience so this campaign will work for them. Opponents say this will energize the critics of kneeling during the national anthem to shift to Under Armour (UAA) and competing goods.
The initial reaction this morning is negative for NKE but the stock is off the early lows. Under Armour is trading up on the news.
The big question for many market players this morning is whether the dip in Nike is a buying opportunity. The stock has been trending up nicely since it bottomed out in October 2017. It has pulled back slightly in the past week after Dicks Sporting Goods (DKS) talked about some slowdown in apparel but technically the stock remains in good shape above its 50-day moving average.
The biggest problem that Nike faces is that it is expensive stock. It is looking at EPS growth of 11% in the fiscal year ending May 2019 and 18% in the following fiscal year, but it sells with a trailing P/E of 34. The company cannot afford to miss estimates when it is trading at a multiple that high. Any negative fallout from the Kaepernick campaign could be magnified if that multiple starts to contract.
Presently Nike is a political battleground which makes it a difficult stock to trade. I would ignore it for now and revisit it after the controversy cools. The stock has bounced off the lows but I expect the pressure to continue for a while.