How To Trade Nike As Shares Slump On Covid Facility Closures In Vietnam

By Richard Henry Suttmeier, Contributor
(Photo by Clive Brunskill) Getty Images

Nike NKE set its all-time intraday high of $174.38 on August 6 and has since traded lower on Covid-related issues. Today’s news is that the athletic shoemaker lost production of 160 million pairs of shoes in facilities located in Vietnam. The stock is nearing its quarterly pivot at $157.14, which was tested on July 1 and again on July 19 and July 20. This decline has downgraded its weekly chart to negative.

Shares of Nike are not cheap. Its p/e ratio is 45.95% with a dividend yield of 0.67%. They have beaten earnings-per-share estimates for four consecutive quarters with their last report released on June 24.

The Daily Chart for Nike

Daily Chart for Nike. Courtesy of Refinitiv Xenith. Refinitiv

Nike had been trading around its 50-day simple moving average until June 24. On June 21 there was a false death cross when the 50-day SMA fell below the 200-day SMA. The company reported a huge earnings-per-share beat on June 24, which resulted in the upside price gap shown on June 25. Note that the stock was trading at its annual pivot at $134.57 on June 24 so an upside surprise was feasible.

On July 1, shares of Nike closed above its quarterly pivot at $157.14. This level held again on July 19 and July 20 as the rally continued. Holding this key level led to the all-time intraday high of $174.38 on August 6.

The horizontal line at the top of the chart is the weekly risky level at $174.42. The two horizontal lines below today’s declining price bar are the quarterly and semiannual pivots at $157.14 and $152.14. Not shown is the monthly pivot at $152.27. The horizontal line in the middle of the chart is the annual pivot at $134.57.

The Weekly Chart for Nike

Weekly Chart for Nike. Courtesy of Refinitiv Xenith. Refinitiv

The weekly chart for Nike ended last week negative. The stock is below its five-week modified moving average at $162.60. The stock is well above its 200-week simple moving average or reversion to the mean at $98.68. The 12x3x3 weekly slow stochastic reading is declining at 77.72, moving below the overbought boundary of 80.00.  

Trading Strategy: Buy Nike on weakness to its quarterly and semiannual value levels at $157.14 and $152.14. Reduce holdings on strength to its 50-day simple moving average at $165.70.

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