The American multinational corporation that is engaged in the design, development, manufacturing, and worldwide marketing and sales of footwear, apparel, equipment, accessories, and services, Nike Inc. (NYSE: NKE) seem to be poised for a price surge as per its latest charts.
#1 Channel Breakout: As you can see from the daily chart, the stock has been trading within a channel during the past few months. This is marked in the daily chart in purple color. Currently, the stock has broken out of the channel. A break from a channel typically indicates that the stock has the potential to move further up.
#2 Strong RSI: The daily chart shows that RSI is above 50 and moving up, indicating strength.
#4 MACD above Signal Line: The daily chart shows that the MACD (light blue color) is currently above the MACD signal line (orange color).
This is a possible bullish indication.
#5 Bullish Stoch: The %K line of the stochastic is above the %D line, indicating possible bullishness.
#6 Flag Pattern Breakout: As evident from the weekly chart, the stock was in an uptrend after which it started consolidating and was in a narrow range.
This is a classic flag pattern, which is a continuation pattern. The flag pattern is marked in purple color in the chart. Whenever a stock breaks out of the flag pattern, it typically continues its previous trend which is an uptrend in this case. Currently, the stock has broken out of the flag pattern which is a possible bullish sign.
#7 MACD above Signal Line: The weekly chart shows that the MACD line (blue color) is above the MACD signal line (orange color). This is a possible bullish setup.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, you can purchase half the intended quantity of shares of NKE at the current price of $75.72 and the rest once the stock closes above $79.80.
TP: Our target prices are $85 and $95 in the next 4-6 months.
SL: To limit risk, place stop-loss at $71.50 (for entry near $75.72) and $76.70 (for entry near $79.80) Note that the stop-loss is on a closing basis.
Our target potential upside is 7% to 25% in the next 4 to 6 months.
- Entry at $75.72: For a risk of $4.22, our target rewards are $9.28 and $19.28. This is a 1:2 and 1:5 risk-reward trade.
- Entry at $79.80: For a risk of $3.10, our target rewards are $5.20 and $15.20. This is an almost 1:2 and 1:5 risk-reward trade.
In other words, this trade offers nearly 2x to 5x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down from the channel breakout level with a high volume. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in the sector.