Taking a second look at Nike (NKE), along with Sketchers (SKX) and Foot Locker (FL). (September 25, 2015)
Here, Nike ( NYSE:NKE ); I had mentioned in the “Chart of the Day” on Thursday, that I wouldn’t be shorting this stock. If you were long the stock, they had great earnings, I would want to be selling into strength, I wouldn’t want to be buying this stock. Low and behold the stock gaps up and then ultimately it trades up another 1.5 percent. I will stand by my suggestion, and that is sell into strength.
Lets look at this on a chart with three standard deviations on the Bollinger Bands, clear up here. This is a level at which the stock breaches 1 percent of 1 percent. It’s basically never supposed to go up above. Here’s one where it went below three standard deviations and immediately it snapped back. My point is, you want to be looking to sell into this strength. Look, I’m a big fan of “Swoosh”, I love it, I’m wearing Nike’s right now, but you want to be selling this stock into strength, you can always buy in back. “But Dan, should I short it?” No, it’s Nike ( NYSE:NKE ), you don’t want to do that.
Look at Foot Locker ( NYSE:FL ), you get the same kind of thing. I would imagine, but I’m not sure, that Foot Locker ( NYSE:FL ) gaped up, (hey they sell a lot of Nike’s) gapped up on Friday, traded and then ultimately closed a bit lower than the open. This wasn’t a volatility squeeze, but at least it wasn’t as extended. You want to be selling this too, wait for more consolidation. Look at Sketchers ( NYSE:SKX ). Sketchers ( NYSE:SKX ), now be careful here, because Nike is ( NYSE:NKE ) up.
By the way, Sketchers ( NYSE:SKX ), they clothe the same part of your body (it’s the stuff down there that’s really smelly, your feet), other than that they have nothing in common with Nike ( NYSE:NKE ). Well, I shouldn’t say that, athletic, but Nike is Nike. But look at Sketchers ( NYSE:SKX ), it gapped up on Friday, “Hey! Gotta buy shoe stocks,” and then traded down. It was down more than 2.5 percent from the open, so Sketchers ( NYSE:SKX ) did not act well on Friday. And here’s the point, just because a stock is in a volatility squeeze, just because it’s resting on a key moving average, does not mean that this is a “screaming” buy and the next move on this stock is going to be higher.
Do you want an example of how that’s not the case? Look at Paycom ( NYSE:PAYC ). It drifted sideways along the 50-day moving average. Sure looked like it could be moving higher. No! It broke down to a low point, it broke down out of this squeeze. My point is, I really think you need to be selling Nike ( NYSE:NKE ) into strength and then look to buy it back at a lower level. Ultimately, the stock is likely to go higher, but doesn’t this look a little bit like a crescendo high? Doesn’t this look a little bit like a blow off top, or at least close to? Anyway, that’s my suggestion on Nike ( NYSE:NKE ).
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