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Asset Watch

Is Nike poised for a rebound?

 

Tuesday, June 29, 2022

Despite outperforming analysts’ Q4 estimates on both the top and bottom lines, Nike’s stock underperformed on Jun. 28. During the Q4 earnings, CEO John Donahoe said, “we’re excited by what we see as we look at our growth opportunities and the strong consumer demand we continue to enjoy.”

 

COVID-19 lockdowns in China led to a 20% decline in currency-neutral sales, which CFO Matt Friend said affected “over 60% of our business.” But he later added, “as lockdowns lifted in specific trade zones in late April, May and early June, we saw improved store traffic and overall consumer demand.”

 

Begging the question, was the sell-off on Jun. 28 a little overdone?

Well, a few key levels may provide the answer. While Nike closed below its May 25 lows, support from January, February, and June 2020 showcases multiple closes of $102 or higher. And although Nike’s stock has hit lower intraday lows twice since May 12, its RSI has recorded higher lows each time. As a result, the selling pressure has been less intense with each drawdown and may provide ammunition for another upswing.

If so, Nike may make a run for $116.60. The level marks the 50-day moving average and is also near the March lows of $116.75. On the other hand, further weakness places next-level support at $96.87, an area that coincides with the October 2019 highs and the June, July and August 2020 lows.

So, should we expect a rebound, or are Nike’s days numbered?


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