SIA Chartsā relative strength rankings help investors manage risk by identifying stocks and sectors which are underperforming relative to their peers and/or their benchmarks and should potentially be avoided. Staying away from stocks that are not attracting capital can help investors to avoid areas at higher risk of absolute declines and relative underperformance and to reduce negative event risk.
In the December 28th edition of the Daily Stock Report, we highlighted Nike (NKE) rolling back down into the Red Unfavored Zone of the SIA S&P 100 Index Report. Since then, the shares have continued to drop down in the rankings and are currently near rock bottom in 100th place.
On Friday, the shares sold off once again dropping 6.90% after the athletic clothing producer released disappointing sales numbers and guidance. Year to date, Nike is down 13.2%, while the S&P 100 Index is up 10.9%. Back in December, an upward trend in Nike (NKE) shares came to an abrupt end when the shared gapped down on a big spike in volume following an earnings report. After that, the shares settled into a lower range between $97.00 and $107.00. Following a failed breakout attempt in February, distribution resumed with a downtrend of lower highs emerging.
On Friday, following another disappointing quarterly report, NKE gapped down on volume again, taking out $97.00 support and signaling the start of a new downleg. Next potential support appears in the $87.00 to $88.00 area based on a retest of the October low and a measured move, then closer to $77.00 based on a measured move. Initial resistance on a bounce appears between the top of Fridayās gap near $98.00 and the $100.00 round number.
This 1% chart highlights continuing distribution in Nike (NKE) shares. Toward the end of last year, Nike rallied along with other large cap stocks and indices in the US but in late December it peaked at a lower high and turned sharply back downward.
Since the beginning of this year, the shares have been under consistent distribution as shown by the series of lower lows. A false breakout in February was quickly reversed and on Friday the shares embarked on a new downleg, completing a bearish Spread Triple Bottom pattern and confirming a recent breakdown below $100.00. Next potential downside support appears at the September low near $88.50, then $84.20 based on a horizontal count. Initial resistance appears near $97.75 based on a 3-box reversal.
With a bearish SMAX score (which is a near-term 1 to 90-day indicator comparing an asset against different equal-weight asset classes) of 3 out of 10, NKE is exhibiting short-term weakness against the asset classes.
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