The chart of Nike Inc. (NKE) had been forming a fairly constructive pattern of higher highs and higher lows since bottoming out around $70 in early August. While a disappointing earnings call this week caused a sudden gap lower for NKE, we could be setting up for the next leg higher as this long-term recovery story continues.
Before this week's downside price gap, it's worth noting that Nike was testing a major resistance level into last week. The $90 price point represents a 38.2% retracement of the December 2023 to August 2024 downtrend, and also lines up fairly well with significant price lows in 2023 and 2024.
To add to this "confluence of resistance," we can also see the 200-day moving average looming large, currently sitting just above $91. For the bull case to continue from here, NKE would have to power through that resistance range and show upside follow-through into at least the mid-90's. This week's pullback brought Nike down to just above trendline support based on the August and September swing lows.
So even though the gap lower was sudden and unfortunate, the price still remains within a well-formed uptrend phase. In terms of price momentum, the RSI is still holding above 40, which is more common in bull phases than bear phases. As long as the RSI remains above this 40 threshold in the coming days, I would be comfortable labeling this as a pullback within an established uptrend.
The weekly chart can provide some additional context as to what the recent upswing me.
