Shares of Nike were under extreme pressure yesterday. The stock closed with a 6.8% loss, its biggest one day drop since late March of 2017. This damaging breakdown extended last week’s clear violation of the 50 day moving average which had earlier held the May, June and September lows. We believe the current sell off has further to go. The end result will be a very low risk entry opportunity for patient investors.
A drift down to the $72.00 to $70.00 area will test a major support zone. This area includes the February/April highs near the lower band. The very powerful post earnings breakout gap, left behind back on June 29th, anchors the upper band. Also in this area is the upward sloping 200 day moving average as well as the 1/3 retracement level of the major rally leg off the 2017 lows. As this key zone comes into play NKE will reach oversold levels last seen at the Q1 2016 and Q3 2017 lows. On the downside, a close below the $70.00 area would be a clear warning sign that a more prolonged basing process will be needed before Nike can regain its footing.
At time of publication we do not have a position in Nike.