The Key Takeaways
- Nike shares lost ground Friday morning as the sports apparel and equipment company, which is undergoing an ambitious strategy shift, provided a weaker-than-expected outlook.
- A 15-month falling wedge is a chart pattern that consists of two converging, downward-sloping trendlines. It often precedes upward breakouts.
- Investors should watch major support levels on Nike's chart around $71 and $65, while observing key resistance levels near $89 and $105.
Nike shares fell Friday after it reported a quarterly report that exceeded Wall Street estimates, but also provided a forecast that was below expectations. The company is undergoing a major strategy change.
Company expects revenue for the current quarter to drop by a low-double digit percentage from last year. On Nike’s late-Thursday earnings call, CEO Elliott Hill said that Nike plans to focus on sports, and sell more products at higher prices. However, he cautioned the short-term effects of the turnaround.
Nike’s shares have dropped nearly 30% in value since January, due to increased competition on both the domestic and foreign markets. This has led to a decline in its share of the market. Stocks were trading at $77 Friday afternoon, down from $75 earlier in the day.
Here, we analyze the Nike weekly chart in order to pinpoint key price levels that may interest investors after its earnings.
The Falling Wedge in Focus
Nike shares have been trading within a 15 month falling wedge chart pattern, which is a combination of two downward-sloping converging trendlines. This often occurs before an upward breakout.
Recently, the stock price has been consolidating just under the upper trendline of the formation, which signals indecision before the quarterly report.
Look at the Nike chart closely to see what major resistance and support levels may be attracting more attention.
The Major Support Levels To Watch
Sell below current levels and the shares could drop to $71. They may also find some support in the area of a horizontal bar that connects several similar price points from February 2018 through July.
The breakdown of this key technical zone opens up the possibility for the price to drop towards long-term support, which is $65 per share. Investors might be interested in bargain hunting in the region around a consolidation area that developed on the chart between late 2017 and the beginning of 2018. The opening prices for several large-ranging days, which marked the low in March 2020 were also in line with this area.
Observe the Key Levels of Resistance
Breakout above the upper trendline in the pattern of a falling wedge could push this price to about $89. The area is characterized by a convergence of resistance due to a trendline that runs from the March 2019 chart through September 2018 and connects the chart’s multiple peaks, troughs and the adjacent 50-week average.
The shares may continue to rise and reach the level of $105 or even higher. Investors buying the stock below the current price may want to look for exits near a line that connects the January and the June 2020 peak with the range of similar prices on the chart from February 2022 until May this year.
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