NIKE - share in sell-off mode after forecast reduction

NIKE Inc. - WKN: 866993 - ISIN: US6541061031 - Price: $148,500 (NYSE)

Nike shareholders had imagined things differently. Both the quarterly report and the outlook yesterday after the US stock market closed were disappointing. Above all, a forecast reduction weighs on the share price. In the current year, the management only expects a sales increase in the middle single-digit percentage range. Previously, those responsible had promised growth in the low double-digit percentage range.

The main problems are on the supply side. Loss of production and difficulties with supply chains, primarily caused by shutdowns in Vietnam, are slowing down growth. From mid-July, Nike recorded a production stop of more than ten weeks in Vietnam. The difficulties are likely to extend into October. But it's not done with that. It will take months to fully ramp up production again.

Meanwhile, analysts are praising the demand situation. She is still very strong. So the main question is: To what extent can Nike still meet the demand, how are the warehouses stocked? But even if the warehouses in Asia are well stocked, it now takes twice as long to ship the goods to the USA. And what's more, the cost of doing so has skyrocketed.

In the first quarter of the 2021/22 financial year, Nike increased sales by 12% to USD 12.2 billion. Analysts had expected more at USD 12.5 billion. Earnings per share, on the other hand, came in slightly above the market consensus at $1.16.

With a view to the technical situation of the share, there is still hope for the bulls. But they can no longer allow themselves any further weakness. Thus, the value has reached a key breakout level at $147.95. A little below that at $144.90 is the 61.8% Fibonacci retracement of the June-August upleg. In between, the EMA200 is listed at just under USD 145.50. This support cluster must therefore hold, otherwise there is a risk of the gap closing at USD 134.82. In extreme cases, the value could also fall to the starting level of the last upward leg at USD 126.68.

The situation eases again above USD 160.29. But only when the downtrend line since August is exceeded will a buying wave towards USD 174.38 become more likely.

Conclusion: The multi-week consolidation in Nike shares is expanding. An important support zone has been reached. Rebound traders put the stock on the watch list. Otherwise, given the fundamental difficulties, restraint is appropriate at the moment.

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(© GodmodeTrader 2021 - Author: Bastian Galuschka, Deputy Editor-in-Chief)