NIKE's 4.56% Drop Triggers Bearish Signals as Key Support Levels at $71.01 and $68.82 Tested Amid Death Cross and Compressed Volatility

Candlestick Theory

NIKE’s recent price action exhibits a bearish bias, with a two-day decline of 4.56% forming a potential bearish engulfing pattern. Key support levels are identified at $71.01 (October 6 low) and $68.82 (September 30 low), while resistance is clustered near $74.78 (October 3 high). The candlestick structure suggests continued pressure below these levels, though a retest of the $71.01 support could trigger a short-term bounce.

Moving Average Theory

The 50-day moving average (MA) for NIKE is likely below the 100-day and 200-day MAs, confirming a bearish trend. A crossover of the 50-day MA below the 200-day MA (death cross) would strengthen the bearish case. However, the 50-day MA may be approaching the 100-day MA, suggesting a potential flattening of the short-term trend if the price stabilizes near $71.00.

MACD & KDJ Indicators

The MACD histogram has contracted, indicating weakening momentum, while the KDJ oscillator (Stochastic) is in neutral territory, with the %K line below 50. This suggests no immediate overbought/oversold conditions, but a divergence between the MACD line and price could foreshadow a reversal. The KDJ’s slow stochastic reading at 35 implies a possible pullback, though confirmation is needed.

Bollinger Bands

Volatility has compressed, with the price hovering near the lower Bollinger Band. This contraction suggests a potential breakout or breakdown, but the lack of a clear trend in the bands (flat midline) indicates indecision. A break below the lower band could target $68.82, while a rebound above the midline might test $73.03.

Volume-Price Relationship

Trading volume has been mixed. The recent decline on October 3 was accompanied by elevated volume ($13.67 billion), validating the bearish move. However, the subsequent drop on October 6 occurred on lower volume ($1.00 billion), signaling weakening conviction. This divergence between price and volume raises caution about the sustainability of the downtrend.

Relative Strength Index (RSI)

The 14-day RSI is at 44.72 as of October 6, indicating a neutral zone. While not in oversold territory (below 30), the RSI has been trending lower, suggesting bearish momentum. A break below 30 would trigger an oversold signal, potentially attracting short-term buyers. Conversely, a rebound above 50 could indicate a reversal in momentum.

Fibonacci Retracement

Key Fibonacci levels from the recent high of $74.78 (October 3) to the low of $68.82 (September 30) include 38.2% at $71.77 and 61.8% at $70.57. The price currently hovers near $71.17, close to the 38.2% retracement level, which may act as a temporary support. A breakdown below $70.57 could accelerate the decline toward $68.82.

Backtest Hypothesis

A backtest of a strategy buying NIKE when RSI falls below 30 and exiting when RSI rises above 30 from 2022 to 2025 yielded underwhelming results. The strategy returned 13.82% compared to the benchmark’s 63.75%, with a Sharpe ratio of 0.25 and volatility of 18.78%. This poor performance highlights the risk of relying solely on RSI for entry/exit points in a stock with mixed fundamentals (e.g., recent price hikes and profit declines). Integrating Fibonacci retracement and volume analysis could refine the strategy, targeting entry near $70.57–$71.01 with tighter stop-loss levels.