Nike is set to report quarterly earnings Thursday after the bell, and one strategist is cautious on the stock heading into the company’s results.
The stock is trading near its 52-week highs, but it’s really priced to perfection and actually remains incredibly expensive.
Investors will be watching for the impact of a weakened euro on its business. Europe accounts for only about 17 percent of Nike’s business, but if there is a big decline due to exchange rates and general malaise across European markets, Nike’s margins could be negatively impacted.
The World Cup may be providing a short-term boost to Nike’s stock, but it’s doubtful it can overcome broad macroeconomic headwinds the company is facing.
Looking at the technical part, the trend is strong and pronounced – long. The price made a correction as it is currently on the 50-day daily moving average. Just below these levels is a diagonal trendline in its role of support as well as horizontal structural support. Fibonacci dropped from the bottom of October 12, 2017 to the top on July 13, 2018 gives us a level of 23.6%. This is quite a strong and significant technical level, and DeMarker has turned from over-sold areas. In order to position ourselves correctly, we are waiting for a successful test of the supports and when DeMarker crosses over 40, we can place the Long order with stop 76.80.
If a breakthrough occurs at the technical levels, and if the price fails to return above them, the decline may continue. First serious support then comes in the face of the 200-daily moving average where there is horizontal support and 50% Fibonacci.
Chart: Used with permission of Bloomberg Finance L.P.
Trader Aleksandar Kumanov