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TECHNICAL ANALYSIS


A Look At Nike

07/07/17 03:18:57 PM
by Koos van der Merwe

On Friday, June 30, Nike shares rose strongly after reporting financial results for its fourth quarter.

Security:   NKE
Position:   Buy

Nike announced that earnings per share for the fourth quarter rose 22% to $0.60, driven by global revenue growth, lower selling and administrative expenses, a lower tax rate and a lower average share count slightly offset by a lower gross margin. The company also confirmed that it is opening up as an Amazon shop. With a direct partnership with Amazon, the company will gain more control over how its products are marketed on the Amazon site, and so improve sales. On June 15, the company said that it is laying off more than 1,000 workers. This announcement caused the share price to drop, but with the recent earnings announcement, the share price rose strongly.

Figure 1. Monthly chart with an Elliott wave count.
Graphic provided by: AdvancedGET.
 
The chart in Figure 1 is a monthly chart of Nike, with an Elliott wave count suggesting that the share price has completed a WAVE 4 and is now rising in a WAVE 5 with a target of either $77.75 or $95.81. However, the PTI (Probability Index) at 32 is very low, suggesting that this is unlikely. The RSI index shown on the chart is also falling, suggesting that the WAVE 5 target may not be reached.

Figure 2. Daily chart with a JM Internal Band.
Graphic provided by: AdvancedGET.
 
The chart in Figure 2 is a daily chart with a JM Internal Band showing a buy. The JM Internal Band is a 15-period simple moving average offset by 2% positive and 2% negative. A move upper the upper band suggests a buy and below the lower band a sell, as shown on the chart. With the jump in the share price on a gap on Friday, June 30, the share price gave a JM Internal Band buy. Volume was strong suggesting that the share price could move higher, however the RSI indicator is at overbought levels, but has not suggested a sell. Also, do not forget that the share price, sometime in the future, will fall to fill the gap. Caution therefore prevails.

Figure 3. Daily Omnitrader chart shwoing a buy signal on the Vote line.
Graphic provided by: Omnitrader.
 
The chart in Figure 3 is an Omnitrader chart showing a buy for the share on June 29, when the share price was $54.59. The Vote line buy signal was based on the Vervoort Stop Strategy and the Red Green Strategy Long Stop as shown on the chart.

The charts show that the Nike share price has been falling since March 2017, but with the recent announcement investors have piled in strongly, and the share price rose on a gap. Yes, sometime in the future the share price will fall to fill the gap, buttTraders could play the share. Investors, however, should be cautious.



Koos van der Merwe

Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.

Address: 3256 West 24th Ave
Vancouver, BC
Phone # for sales: 6042634214
E-mail address: petroosp@gmail.com

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