Shares of Nike Inc (NYSE:NKE) had a bumpy ride so far in 2017. Littered with up and down gaps, the stock has been frustrating for longer-term holders as well as the more active market participants. But if done properly, this type of price action can reap profits.
Starting with the top-down approach of looking at the sector level first, followed by the NKE stock charts, we can see some giddiness building up.
On the chart of the Consumer Discretionary Select Sector SPDR Fund (NYSEARCA:XLY), to which NKE stock belongs, we note that it has remained in a big-picture consolidation phase since this past June. All the while, the XLY ETF did hold above its red 200-day simple moving average and in fact yesterday it scored a marginal breakout to the upside.
In other words, although this is no guarantee for NKE stock to also follow suite, it is comforting to see a constructive picture in the underlying sector that this stock belongs to.
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
Moving on to the multiyear chart of NKE stock, we see that although it has been frustrating for longer-term holders following the sharp upside move into late 2015, the price action since could at least thus far be looked at as a constructive consolidation phase.
Note how the nearly 30% drop from the 2015 highs down into the 2016 lows really only mean-reverted the stock back to its red 200-week simple moving average. For better trend following long-side entries NKE stock now has to clear and break out of this big picture consolidation phase to the upside.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
Finally, on the daily chart we see that after a recent trading bottom in mid-October, NKE stock rallied and over the past two weeks has constructively consolidated above its 100- and 200-day simple moving averages (blue and red lines respectively). As a result of the October rally NkE stock has begun to work into a still partially unfilled down-gap from this past August, which I marked on the chart with the blue box.
Such gaps in charts often times are important tells about investor psychology in a stock and offer high-probability opportunities in all-time frames, including intraday. For those unfamiliar with the power of gaps I am holding a special webinar on Nov. 15 for InvestorPlace readers. Register HERE.
If and when NKE stock from here makes a next move higher and can hold above the $56.50-$57 area on a daily closing basis, then the next upside target stands a good chance of becoming the high $50s, i.e. the top of this unfilled gap.
So you know, Nike is scheduled to report earnings on Dec. 19 … so please circle that date as the next risk date for the stock.
Check out Anthony Mirhaydari’s Daily Market Outlook for Nov. 14.
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