Shares of Nike (NKE) soared 8.8% Wednesday as the athletic apparel company posted a phenomenal quarter that stunned even the analysts that cover the company. Jim Cramer recommended investors watching Mad Money to buy Nike ahead of earnings in last week's "Game Plan", but even he said he didn't expect things to be this good in the middle of a pandemic.
Even before Coovid-19 began, Nike had begun to transform itself from a wholesaler to a digital-first, direct-to-consumer brand that included greater customer loyalty and increased gross margins. New CEO John Donahoe came onboard in October 2019 and accelerated the company's plans.
Ultimately Nike plans to be 50% direct-to-consumer, a ratio that seems more than likely given its strong growth this quarter. Sales in China surged 8% and the rest of the world was also better than feared.
Cramer said even at new all-time highs, Nike is still a buy. He urged investors not to miss this fabulous move from one of the world's great brand names.
Let's check on the charts and indicators of NKE again. We last reviewed them on Monday September 21 where we wrote ahead of earnings that, "Longs should raise stop protection to a close below $110." With earnings now in the rear view mirror a fresh look at NKE might be a good idea.
In this daily Japanese candlestick chart of NKE, below, we can see that prices gapped sharply higher yesterday on heavy trading volume. This is the kind of price action that traders love to see, but it could have been stronger. Wednesday's candle bar is red and that means that prices closed below the opening. Anyone who went long or added to longs on the strong opening yesterday went home with a loss. This does not mean that prices cannot go higher but it is a short-term warning message. The other day we pointed out that price momentum was slowing and we can see in the lower panel that momentum did rise yesterday, it did not make a new high so the pattern of lower highs continues. Again, this does not mean that prices cannot go higher, it just uses math to tell us that the pace of the advance is slowing.