Just Do It! After Earnings
- Posted by Greg Harmon
- on March 17th, 2011
Nike reported earnings Thursday night in the hopes that all analysts and traders would either be drinking green beer or watching college basketball or both. Unfortunately a few were watching and ripped it down $5 in after hours trading. I guess they did not like the numbers. But from a technical analysis perspective the beat down makes it quite interesting. Let me explain.
The Set Up
On the daily chart below Nike the red box with the star in it is where the stock is trading after hours. It had been starting a base after a downward move at the support of the 50 and 100 day Simple Moving Averages (SMA’s) near 85. Notice also that this is near two key Fibonacci levels, 85.88 in blue measuring 23.6% below the major move higher from July to December, and 85.11 in orange measuring a 38.2% move up off of the bottom from the retracement back on that move in January. The bottom of the Bollinger bands were at 84.38 not to far below. There was a lot of pressure built up around 85! The Relative Strength Index (RSI) had just started to turn back higher and the Moving Average Convergence Divergence (MACD) indicator had leveled. Nike looked biased to the upside. The after hours move would put it wildly outside of the Bollinger bands and at a new lower low not to far from the 200 day SMA at 79.23.
The weekly chart above looked a little weaker, although it had just pulled back to support at the 20 week SMA at 85.58 with one day left in the week. The RSI is heading towards the mid line and the MACD is becoming more negative. The move in after hours would put the price right on two key trend lines that are intersecting near 80.25. This would be modestly below the lower Bollinger band, and also just above the 50 week SMA at 78.42. There should be a lot of support at this level.
With the technicals on the daily chart set to push it higher, and it being far outside of the Bollinger bands, a long entry near the after hours level near 80.00 could run higher toward the bottom Bollinger band at 84.38. Use a stop just below the 200 day SMA at 79.23 or the 50 week SMA at 78.42, depending on your risk tolerance. If the stops trigger than you could look to reverse and short it down to 70.65 using the same stop or 80.25. Trade’m well!
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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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