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Nike tumble worth watching

Nike has had a tumbling share price for much of this year, down over -30% from the peak made in early February. The company has an earnings call on 28 September (Thursday), which will give insight into recent performance and outlook.

The market seems braced for bad news, with the current narrative suggesting that the return of student loan repayments in October will crimp consumer discretionary spending. Over 40 million Americans have student debt, with around $1.7 trillion of debt outstanding (federal government and private lenders). Student loan payments were suspended at the height of the Covid pandemic in 2020, and the repayment suspension was extended until now. It is fairly easy to see that having debt payments reinstated will hit many pocketbooks and that consumers could cut back on spending in response.

The chart below is the daily chart of Nike. The 14-day RSI is oversold, but this makes sense given the slide in the share price this year. Analysts have shifted their price targets down, and some have put the share as a ‘hold’ now, which in Wall Street language is taken as a ‘sell’. Fair enough. Any holders or bulls on the share will need to see a push back above the 20-day moving average to give any recovery hope. The $103 area has seen a lot of low/high sort of reactions over the last few months, which makes this a biggish level to try and break above in order to give shareholders some heart.

Downside risk is easy to see on the monthly long term chart (below). This is a semi-log chart, in order to show percentage moves in price. The long term rising line (yellow) from 2009 is giving way (again) and the rising line from 2020 (red) is under pressure. The flatter support line from 2016 (purple) is worth watching as a big bear trigger near $77. Head and shoulders top? A bit ugly and not very symmetrical. Optimistically, if current bear pressure draws out buyers (on the view that trendlines show the sentiment around supply and demand for the share) then this could lead to a pullback to the $130 area to test the highs of 2023. Big bull pressure would see a rally to approach $180 again and try and break to new all-time highs. The focus now though is on the earnings call. The student loan story could be a sell the rumour, buy the fact play of course, all to play for as key chart support is being tested.

Gerry Celaya

Chief Strategist


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