Nike, Inc (NYSE:NKE) opened slightly lower on Monday and was falling about 2% off Friday’s closing price in afternoon trading.
The multinational footwear, apparel, equipment and services-based company is set to print fourth-quarter and full-year 2022 financial results after the market close.
When Nike printed its third-quarter earnings on March 21 and beat on earnings and revenue, the stock gapped up 5.45% the following day but sold off intraday to close the trading session up 2.15%.
For the fourth quarter, analysts expect Nike to report earnings of 81 cents per share on revenues of $12.07 billion.
Ahead of the earnings event, a number of analysts weighed in, with 10 firms lowering price targets since June 14. The reduced priced targets range from $123 to $168, but even the lowest new target price suggests about an 11% increase from the current share price.
The reaction Nike receives post-earnings is likely to be the deciding factor on whether the stock will trade in bullish or bearish territory for the time being, because although the stock recently negated a downtrend, a gap below the current share price exists that could pull Nike lower.
Of course, holding stocks or options over an earnings print is akin to gambling because stocks can react bullishly to an earnings miss and bearishly to an earnings beat.
Options traders, particularly those who are holding close dated calls or puts, take on extra risk because the institutions writing the options increase premiums to account for implied volatility.
The implied move for options of Nike expiring this week is 8%.
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The Nike Chart: Nike opened with an inside bar pattern on Monday, but when the stock attempted to break bullishly from Friday’s mother bar, it rejected the 21-day exponential moving average, which caused sellers to come in.
If the stock is able to hold above Friday’s low-of-day, the inside bar remains valid and Nike is likely to break up or down from the pattern in extended hours trading after its earnings print.
- The inside bar leans bullish because Nike was trading higher before forming the pattern. A gap below between $108.10 and $109.61 may drag the stock lower in the event Nike doesn’t receive a big reaction to its financial results.
- If the stock trades into the gap, traders and investors can watch for Nike to print a reversal candlestick, such as a doji or hammer candlestick, toward the bottom of the gap in order to take a position.
- Bullish traders would also like to see the gap filled over the coming days because that would cause Nike to print a higher low and confirm a new uptrend is in the cards. Gaps on charts fill about 90% of the time, which suggests Nike will fall to fill the empty range in the future.
- Nike has resistance above at $115.90 and $120.52 and support below at $109.90 and $103.46.
Photo courtesy of Nike.
