Use that Nike pullback to grab the rebound rally

In our May 23 review of Nike (NKE), we predict a price rebound, but a sell firm lowered the apparel maker’s price target to $150 from $160. My view on the charts is that prices are higher as we wrote that “aggressive traders could go long NKE at current levels, risking a close below $103. Above $118 , traders could increase their exposure. I’m looking for a bounce in the $125-$130 area, maybe higher.”

Let’s check the indicators again.

In this daily bar chart from NKE, below, we can see that the price bounced back at the end of May. Price quickly reached below our first target zone of $125-$130 and tested below the falling 50-day moving average line. The slope of the 200-day moving average line is still negative and intersects around $146.

The On-Balance-Volume (OBV) line has rallied and is about to break its November downtrend. A move to aggressive buying is a bullish signal.

The Moving Average Convergence Divergence Oscillator (MACD) turned higher in late May for a signal to buy hedging shorts and is now close to crossing the zero line for an outright buy message.

In this weekly Japanese candlestick chart from NKE, below, we can see a bullish reversal pattern – a bullish engulfing pattern with confirmation. This inversion looks like a bottom-up bend, not a bottom-to-side bend. The slope of the 40-week moving average line is negative, but it is a lagging indicator.

The weekly OBV line has been down since the start of 2021, but the latest rise is a good start towards more bullish posture. The MACD oscillator has narrowed since our last check and is approaching a weekly buy signal for hedge shorts.

In this daily Point and Figure chart from NKE, below, we can see an upward price target of $161.

In this weekly Point and Figure chart from NKE, below, we can see the same price target as the daily chart (above).

Basic strategy: Keep waiting for our May recommendation for a long time. Raise stops to $110 from below $103. Our price targets now are the $125-$130 area followed by the $160 area.

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Darryl A. Chapin