SIA Chartsâ 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.
Shares of shoemaker Nike (NKE), plunged last week after the company disappointed investors on both earnings and guidance. Relative strength analysis, however, has shown the stock to be an underperformer at risk of disappointment for several years now.
Nike fell out of the green zone in the SIA S&P 100 Index Report in January of 2022. Since then it has spent most of its time, including all of 2024 to date, in the Red Unfavored Zone, with only the occasional brief pop up into the yellow zone. Currently, Nike is at rock bottom sitting in last place.
Since dropping out of the green zone, Nike is down 54.8%. Year to date, Nike is down 30.2% while the S&P 100 Index is up 20.7%. Back in 2022, Nike (NKE) shares staged a major selloff, then settled into an $80.00 to $125.00 trading range which then narrowed into a $90.00 to $120.00 zone. Near the end of last year, Nike attempted to break out to the upside, but failed, and since then, distribution has resumed.
During the winter, Nike slipped back under $100.00 but the real break came last week when the shares plunged down through $90.00 and $80.00 on a massive spike in volume which either represents the start of a new down leg, or a selling climax.
A measured move from the recent range suggests potential support may emerge near $80.00. Initial resistance appears near the $80.00 breakdown point.
Nike (NKE) shares have been under distribution since the end of 2021 but near the end of 2023, they attempted a rebound, only to fail short of a long-term downtrend resistance line. This year, selling pressure has intensified once again. The shares have completed Double Bottom and Spread Triple Bottom breakdowns that combined into a Bearish Catapult. NKE has also taken out an uptrend support line and slumped to its lowest levels since late 2020 confirming a downtrend is underway.
Next potential downside support appears near $72.95 based on a vertical count, $67.40 based on a horizontal count, or the 2020 low near $59.85. Initial resistance on a rebound appears near $82.20 based on a 3-box reversal and a retest of a recent breakdown point.
With a completely bearish SMAX score (which is a near-term 1 to 90-day indicator comparing an asset against different equal-weight asset classes) of 0 out of 10, NKE is exhibiting short-term weakness across the asset classes.
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