Date: 22 Feb 2019

US sportswear giant Nike hit the headline for the wrong reasons when college superstar, Zion Williamson was felled within the first minute of Duke’s match against North Carolina.  Basketball fans across the world, including former US president Barack Obama, were left stunned when the rubber soles of Williamson’s Nike shoe burst open, causing the basketball star to collapse in pain and withdraw from the game. As Williamson deals with an injured knee, Nike is dealing with a PR disaster that promises to become a perfect storm. 

 

The market reacted with a gap down, but, was the slump surprising or had there been any signs of Nike stock weakness before? From a chart technical point of view, there was a low in the Nike share price around Christmas last year. From then on, a rally began that catapulted the price into the 85 range. In two attempts, the market tried to rise above 85.38 but failed. The first signs of a double top appeared. 

 

However, the MACD indicator shows a bearish move. The MACD histogram formed a so-called divergence (when the indicator and the price move in different directions). In this case, the market showed higher prices, whereas the MACD histogram fell downwards. As a rule, such a divergence is resolved in the direction of the indicator. Meanwhile, the indicator has turned in, which could be another negative sign.

 

If the market fails to regain the old highs, the next support could be in the 81.20 range. If the market fails here as well, further support for the market could lie in the 78.40 and 76.00 areas. If the market also falls through these essential supports, a new analysis will be needed. If the bulls succeed in turning the tide, the market could expect the first resistance in the 85.85 range.

 

NIKE.US Daily Chart | Source: ActivTrader

NIKE.US Daily Chart | Source: ActivTrader 

 

Written by Daniel Schuetz, External Analyst

 

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