PreMarket Prep Stock Of The Day: Why The Nike Stock Chart Could Signal A Fall To The Double Digits

Over the years, Nike Inc NKE has been an extremely volatile stock for some reason, even when it traded in double-digits and before the decimation of the market.

That volatility is continuing in a big way following Nike's fourth-quarter report after the close on Monday.

Nike Runs Downhill: Nike made its all-time high in November at $179.10 and backed off to end the month at $169.24. It is now trading in the red for the seventh month in a row, and at the current low for the move ($103.46) had fallen 42 percent. Now that is a weak stock.

Buyers Enter Nike Ahead Of Q4 Report: Nike has ebbed and flowed with the broad market the rebound off the recent low took the issue to $123.82 on June 8, but it was unable to hold those gains.

Buyers looking to extract some alpha with a pre-earnings rally put a double bottom in place at the $104.50 area last week.

They were rewarded when the issue peaked on Monday at $113.21 but weakened to close at $110.50. Many of those preemptive buyers may have been completely out of the issue ahead of the report.

Nike's Q4 Beat And More: After the close on Monday, the company reported quarterly earnings of 90 cents per share, which beat the analyst consensus estimate of 81 cents.

The company reported quarterly sales of $12.2 billion, which beat the analyst consensus estimate of $12.07 billion.

In addition, the board authorized a new four-year, $18-billion program to repurchase shares of Class B common stock.

On a negative note, following the report several Wall Street analysts trimmed their price targets, essentially chasing the stock price.

PreMarket Prep's Take: When the issue was being covered on the show Tuesday, it was trading lower by nearly $3 at the $107 area.

Co-host Dennis Dick, who kept a close eye on the after-hours action, witnessed the issue bolt higher off the headline number only to give up those gains — and then some.

“They must have said something on the conference call that was not good. I would not be surprised to see Nike eventually challenge the low for the move at $103.46.”

The author of this article noted potential support ahead of the low for the move at the pair of lows at $104.50 from last week. From a longer-term perspective, the ugly downtrend in the monthly chart is a warning sign the issue may be heading for double digits.

NKE Price Action: The issue caught a bid with the broader market off the open and blasted all the way to $114.05. Nike then reversed course, similar to the broad market.

The ensuing decline breached the pair of lows at $104.50 area, falling to $104.

The stock ultimately fell 6.98%, ending the session at $102.78. 

The discussion on the issue from Tuesday’s show can be found here:

Photo courtesy of Nike.