Nike's stock price has hit a new low in over four years! How to seize the potential "bottom-fishing" opportunity? (2024.07.03)

Hello everyone, this week's 【Technical Tracking】 will analyze the world's largest sports shoe and apparel brand — Nike ($Nike(NKE.US)$）。

Hot Events

On June 28, 2024 (Friday), Nike's stock price closed down 20%, reaching a new low in over four years. This followed the release of the latest Earnings Reports, which showed this global sports brand struggling for growth, facing intensified competition in key markets, a shrinking consumer base, and a series of strategic missteps.

Data shows that in the fourth quarter of fiscal year 2024 (ending May 31, 2024), Nike's revenue fell by 1.71% year-on-year to $12.61 billion, falling short of Wall Street Analysts' expectations of $12.86 billion. Revenue has entered negative growth, marking a significant downturn in Nike's performance over recent quarters.

Nike updated its revenue guidance, predicting a decline of about 5% in fiscal year 2025; the situation is expected to be worst in the first fiscal quarter (starting June 1, 2024), with revenue anticipated to fall by about 10%. This indicates that Nike's downward trend is intensifying. Prior to this, the company had expected overall revenue in fiscal year 2025 to have positive growth.

According to Statistics, after the Earnings Reports were released, at least five Analysts downgraded Nike's stock rating, and even more Analysts lowered their Target Price for Nike. Based on FactSet data, the average Target Price for Nike set by Analysts is currently $97.29, significantly lower than the $110.77 from a month ago.

Morgan Stanley Analyst Alex Straton stated that in the short term, Nike's stock price is caught in a 'penalty zone' under market pressure. She downgraded her rating on Nike from 'Overweight' to 'Equal Weight', and cut the Target Price from $114 to $79, equivalent to a 30% reduction.

As of July 3, 2024, Nike's stock price has fallen by 30% this year, significantly underperforming the S&P 500 Index, which has risen by 16% during the same period. The main reason for Nike's poor reception in the market is the company's sluggish growth, which can be clearly seen in the recent quarters' Earnings Reports.

Wedbush Analyst Tom Nikic pointed out that during the sharp decline in Nike's stock price, many investors viewed this as an opportunity to 'buy the dip.' However, the analyst believes that Nike's stock price will continue to remain in the 'penalty zone' until the company launches innovative products and the management regains investor trust.

Technical Analysis

Trend analysis:

From the weekly chart, Nike's stock price shows clear signs of weakness, having dropped to a new low not seen in over four years, indicating that future trends may not be optimistic.

The daily chart shows that prior to the release of the Earnings Reports, Nike's stock price had a slight upward movement over the past two months, indicating that the market held a certain level of optimistic expectation, betting that Nike was emerging from a downturn. However, with the Earnings Reports released on June 28, market sentiment instantly shifted to despair, causing the stock to record its largest single-day drop in over 20 years.

Indicators interpretation:

• Nike's stock price has now fallen below all major moving averages, including the 50-day moving average (MA50) and the 200-day moving average (MA200), which reflects a very poor market sentiment.

• After the earnings reports were released on June 28, the single-day volume surged significantly, surpassing the cumulative volume of the past 10 trading days, indicating a massive selling pressure in the market.

• The RSI has been in the oversold region (<30) for several days, and once this indicator rises above 30, it may be a potential buying opportunity.

• The KDJ indicator is also in the oversold region (<20), and when the Candlestick and D-line cross upward, it may signal a potential short-term bullish signal.

Focus direction:

Nike's stock price has just experienced a sharp decline of 20%, which from a technical analysis perspective is a clear bear market signal. This also marks the complete failure of the bulls’ attempts to push up the stock price over the past two months, greatly impacting market sentiment, which will need time to gradually regain confidence.

For investors interested in 'bottom fishing', in addition to paying attention to potential buying signals released by the RSI and KDJ indicators, they should also monitor changes in volume, as a gradual return of volume to normal levels may indicate a decrease in market selling pressure.

This content discusses technical analysis; other methods, including Fundamental Analysis, may provide different perspectives. The examples provided are for illustrative purposes only and do not reflect expected results.

All investments involve risks, including the potential loss of principal, and there is no guarantee that any investment strategy will be successful.