Why Nike's Stock Looks Ready For A Blue Sky Run

Nike Inc NKE gapped up a massive 14% on June 25 after printing its fourth-quarter and 2021 fiscal results. On Aug. 5 the company announced a quarterly cash dividend of $0.275 per share payable on Oct. 1 to holders of the company’s outstanding Class A and Class B Common Stock as of Aug. 30.

After gapping up Nike’s stock ran another 14% higher until reaching a new all-time high of $174.38 on Aug. 6 before entering into consolidation.

See Also: How to Buy Nike Stock

The Nike Chart: Nike is trading slightly lower for the fourth trading day in a row, consolidating its massive bull run. The consolidation has caused the stock to trade about 3% down from its all-time high in a flag formation. The flag formation paired with Nike’s sharp move higher has formed a bull flag pattern with the pole created between July 28 and Aug. 6 and the flag between Aug. 6 and Thursday.

The consolidation has also helped Nike to calm its relative strength index (RSI), which was measuring between 67% and 82% for an extended period between June 24 until Thursday. When the RSI of a security measures over 70%, it's considered to be in overbought territory for technical traders which is a sell signal.

Volume has been slowly declining on Nike’s stock, which indicates the consolidation is healthy and when Nike dipped Thursday morning to $169.48 bulls came in and bought the stock. If Nike closes the trading session near the $170 level it will print a hammer candlestick, which indicates higher prices may come on Friday.

Nike is trading slightly below the eight-day exponential moving average (EMA) but above the 21-day with the eight-day trending above the 21-day EMA, which indicates bullish indecision. The eight-day EMA will now act as resistance for the short term.

Nike is trading well above the 200-day simple moving average which indicates overall sentiment in the stock is bullish.

• Bulls want to see Nike regain the eight-day EMA and for big bullish volume to come in and push Nike up out of the bull flag and back up to its all-time high. Bulls will then want to see bullish momentum come in and drive the stock up into blue skies where there is no further resistance in the form of price history.
• Bears want to see bearish volume come in and drop Nike’s stock down from the bull flag pattern. If Nike’s stock drops below about the $168 area the bull flag will be negated and the stock could then fall toward the $166 level. Below $166 there is support at $162.