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Asset Watch
Thursday, August 15, 2024
The financial markets were back in rally mode on August 13, after confidence returned following last week’s flash crash. And while volatility may persist as politics and central bank uncertainty dominate the news cycle, Nike has already suffered investors’ wrath.
The stock sank by more than 20% after the company reported weak fourth-quarter results in June and analysts cut their price targets. But, with the Olympics providing a nice sentiment bump, could a comeback be on the horizon?
Maintaining their outperform rating and price target of $112, Bernstein SocGen Group analysts noted on August 13 that Nike’s brand performance has improved alongside higher average selling prices (ASPs), reduced markdowns, growing search interest, and positive retailer feedback. Its Direct to Consumer (DTC) channel has also progressed as new launches pique shoppers’ interest.
Nike was stuck in a range for the last several weeks, with the stock price largely fluctuating between $71 and $75. Attempts to break above the $75 area (the horizontal white line) were rejected, and Nike struggled to maintain positive momentum. Although, the tide may have turned on August 13.
Amid the market optimism and positive comments from analysts, Nike burst through the $75 area and has support from its 5-week moving average (the blue line). However, it’s right up against resistance from the 10-week MA (the yellow line), which makes the $79 area a key confirmation zone.
To avoid enduring a false breakout, the best approach is to wait for a confirmed close above the 10-week MA. If Nike reclaims its 10-week MA and has support from the $75 area and the 5-week MA, the powerful combination could tilt the risk-reward in your favour.
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