Nike Inc. (NKE) has been rated a new sell by the institutional firm Redburn here on Thursday. Nike is not expected to report its fiscal third-quarter earnings until March 21 after the close of trading, but let's check the charts and indicators of the footwear and apparel giant to see how they are fitting in advance of its results.
In this daily bar chart of NKE, below, I can see that prices have been slipping lower from early February. NKE now trades between the cresting 50-day moving average line and above the bottoming 200-day line. The On-Balance-Volume (OBV) line shows weakness from early January and suggests that sellers of NKE have been more aggressive than buyers. The Moving Average Convergence Divergence (MACD) oscillator is below the zero line in sell territory, but the two moving averages that make up this indicator have narrowed and we soon could see a cover shorts buy signal.
In this weekly Japanese candlestick chart of NKE, below, I can see that the price of NKE retraced about 50% of its decline from around $180 to $80. An upper shadow around $130 tells me that traders have rejected the recent high. NKE is above the flat 40-week moving average line while the weekly OBV line turned flat in February after a rise. The MACD oscillator has weakened and is very close to a downside crossover and take profit sell signal.
In this daily Point and Figure chart of NKE, below, I can see a potential downside price target in the $112 area.
In this weekly Point and Figure chart of NKE, below, I can see a downside price objective in the $112 area.
Bottom line strategy: I have no knowledge of what NKE will tell shareholders next week, but the charts and indicators suggest its shares are likely to weaken further. Avoid the long side of NKE for now.
