NKE Stock: an Advancing Wave has Begun
It has been a long a tedious road and, while Velcro gave it a shot, the shoelace continues to reign supreme. It is hard to believe that we still succumb to such an archaic technology like the shoelace in a time when technological breakthroughs are a common occurrence. Frankly, I am sick of tripping over my laces and watching my loved ones do the same.
Nike has brought to market the “HyperAdapt” self-lacing shoe. Although it is exorbitantly expensive at this exact moment, I believe that these are the necessary steps in bringing smart technology into our apparel. I have my doubts that a shoe at this price will do anything for the bottom line, as most people won’t pay $720.00 for a pair of running shoes.
The technology is real, though and—the same way supercars help Toyota Motor Corp (ADR) (NYSE:TM) and General Motors Company (NYSE:GM) sells cars—I believe this new technology will help drive consumers to the Nike brand.
I am bullish on Nike, regardless of the actual catalyst, and this bullish belief is predicated on the price action seen on the Nike stock chart. There are numerous indications that are suggesting that a higher share price is likely.
The following NKE stock chart illustrates a pattern that has developed that is suggesting higher prices.
Chart courtesy of StockCharts.com
The stock chart above illustrates a constructive pattern that is instrumental in deciphering the next trading direction for Nike shares.
This pattern in question is a falling wedge, consisting of two converging trend lines. One trend line represents resistance and the other trend line represents support. Falling wedges are consolidation patterns, and the purpose of these patterns is to unwind any overbought conditions that were generated from the previous advance and set up the next move in price.
Wedges, just like triangle patterns, often have five points of contact before the pattern breaks in either an upward or downward direction. Nike stock has completed these five points of contact, and it broke out to the upside late last week. This price action is now suggesting that a new advancing impulse wave is in development that will push the price of Nike shares higher.
The initial price objective of this pattern is the highest point from which the wedge began to develop. This level is the previous all-time high that was set in December 2015, at a price of $67.39. Let me reiterate that this level is only the initial price objective, and a break above this objective would open the door to much higher prices.
The following price chart illustrates the pattern and signal that suggest that higher NKE stock prices are likely.
Chart courtesy of StockCharts.com
There are two distinct indications on the Nike price chart above that support the notion that a higher Nike share price is likely.
The first indication appeared soon after the financial crisis concluded in 2009, where a bullish pattern developed on the Nike price chart. The pattern is known as an ascending channel.
An ascending channel has two parallel upward sloping trend lines that define upper resistance and lower support. A share price will oscillate between these two trend lines for as long as time permits.
As long as NKE stock remains within the confines of this channel, the trend can continue indefinitely. At this current juncture, resistance outlined by the channel currently sits near the $100.00 level.
The second indication is found in the top panel labelled “RSI”. The relative strength indicator (RSI) uses an oscillator to measure overbought and oversold conditions. When this oscillator is above 70, it suggests that the stock is overbought. When it is below 30, it suggests that the stock is oversold.
In bull markets, it is a common occurrence for the RSI indicator to remain above 50 when the price is in a trending phase. The current reading at 57 suggests that the price is currently trending, and that the price of Nike shares can continue to appreciate before it reaches a level that suggests that the stock is overbought.
Bottom Line on Nike Stock
I am bullish on Nike stock because the price patterns and indicators on the NKE stock chart support this view. This bullish view supports the notion that Nike is on its way to creating new all-time highs.