Loyal Nike Shareholders Hanging Tough (NKE)

Nike has held up well in the first quarter but has more work to do before entering a new uptrend.

Nike Inc. (NKE) performed well in 2015, gaining nearly 30% while lifting into a leadership role in the Dow Jones Industrial Average. This follows a long tradition of superior performance that’s included six splits in the last 26-years. Volatile price action, starting in November 2015, has brought the stock well off rally highs, raising doubts about the future of its uptrend. Fortunately for bulls, it looks like the malaise will eventually pass, allowing a resumption of its upward trajectory.

The company has expanded out of sporting, textiles and footwear in recent years, into a variety of equipment, accessories and services. It’s made dozens of profitable endorsement deals to build and expand its iconic brand, showing surprising loyalty to its image makers, as we saw after Tiger Woods got into a well-publicized 2009 scandal. The company chose to retain his services at that time, weathering the media maelstrom while he was dumped like a hot potato by other sponsors.

A multiyear uptrend topped out at 9.55 (post-splits) in 1997, giving way to a rounded correction that lasted into a 2004 breakout. That rally failed to gain steam until 2006, when it took off in an assault that booked a 60% gain into the April 2008 top. It sold off with world markets during the economic collapse but held up well compared to broad benchmarks, finding support at a four-year low in single digits.

The stock lifted to a new high in 2010, entering a stair stepping phase that carved brief rallies, interspersed with many weeks of sideways consolidation. This is a typical rally pattern for securities with high institutional ownership that can be frustrating for traders looking to book quick profits. A single major correction marred the nearly textbook price action, dropping price 25% in just three months.

The uptrend ejected into a momentum phase in 2013, lifting into the 2015 high in a rising channel that more than doubled the stock’s price. A sudden decline in August 2015 waved a red flag that warned of rising volatility, which was confirmed when the rally stalled above 66 in October. That yielded a triple top in December, followed by a two-legged selloff into the low 50s. …read more

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Category: NKE

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