Old Support Becomes New Resistance: Nike Breaches A Major Level

Nike Inc NKE shares were trading lower by $1.86 at $59.73 in Monday's session. In the grand scheme of things is not a big deal, however, from a shorter-term perspective, today's price action doesn't bode well for the near-term direction of the issue.

The issue sprinted to a new all-time high on December 23 ($68.19), feeding on the momentum of a better-than-expected Q3 report. Along with the stellar report for EPS, the company announced outstanding orders growth.

However, the downward momentum in the broad market in January took its toll on the issue, taking it to as low as $53.64 on February 8. From there, it rallied hard ahead if its next report that came out after the close on March 22 that didn't meet Wall Streets expectations. The attempted run to a new all-time high came up short, peaking the day of the report at $65.44.

Related Link: ESPN Explains How Nike Lost Steph Curry To Under Armour

On the day following the report, Nike bottomed at $61.15, but wasn't able to rebound any higher than $63.45 in that same session and not higher than $62.64 in the following six sessions. More importantly, it bottomed in a narrow range encompassing that level ($61.12-$61.31) in five of the next sessions. The one outlier being its low last Wednesday at $61.77.

In today's session, that major support level has been breached with a vengeance. After a higher open, it began to weaken and once the $61.15 area was breached, the pace of selling accelerated. It has continued to make new lows for the day, with the one current one resting at $59.77. Based on the daily charts, there is no identifiable support until its March 11 low of $59.13.

Now that the issue has distanced itself from its major support level, investors can view this area as major resistance if it can muster a rally back to that area.

When following one of main tenets of technical analysis, old support becomes new resistance. Considering Nike held that area in six of seven sessions following its report, chances are sellers will be lined up to limit losses from a losing position as aggressive short sellers will be looking to attempt a short position into strength.