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Key Takeaways
- Nike shares dropped more than 12% in extended trading on Thursday after the company reported weaker-than-expected quarterly revenue and cut its sales outlook.
- The stock sits poised to break down from a rising wedge pattern.
- A measured move in Nike shares, which we calculate by subtracting the distance of the downtrend preceding the rising wedge from the pattern’s lower trendline, projects a price target of $75.
- It’s also worth monitoring if a prominent swing low that formed on the chart in October 2022 provides support around $82.
Nike (NKE) shares dropped more than 12% in extended trading on Thursday after the athletic apparel and equipment maker reported weaker-than-expected quarterly revenue and cut its sales outlook.
Below we take a closer look at the Nike chart and use technical analysis to point out several levels worth monitoring.
Breakdown from Rising Wedge Pattern
Nike shares trended sharply lower between late February and early April after the 50-day moving average (MA) crossed below the 200-day MA to form a bearish death cross signal. Since that time, the stock has oscillated within a rising wedge, a chart pattern that indicates a continuation of the current longer-term downtrend.
To be sure, the stock sits poised to break down from the pattern Friday following the company’s disappointing results. It’s also worth noting that trading volume has increased over the past week, suggesting that institutional investors have been rebalancing their portfolios before the earnings report and end of the quarter.
Monitor These Levels Amid Further Weakness
Investors can use the measured move technique to project where Nike shares may be headed next if they continue to decline post-earnings.
To do this, we calculate the distance in dollars of the most recent downtrend preceding the rising wedge and deduct that amount from the pattern’s lower trendline. In this case, we subtract $18 from $93 to arrive at a price target of $75.
This provides a possible area on the chart where bargain hunter investors may look for buying opportunities, particularly if other technical indicators are flashing oversold conditions at the same time the stock trades near this level. Amid further weakness, it’s also worth monitoring if a prominent swing low that that formed on the chart in October 2022 provides support around $82.
Nike shares fell 12.4% to $82.54 in after-hours trading.
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As of the date this article was written, the author does not own any of the above securities.