Nike (NKE) Struggles—Is It Time to Average Down?

Nike (NKE) has been facing a challenging period, with recent earnings showing revenue declines and pressure on its growth outlook. The company's Q3 revenue declined by 9%, and Q4 guidance suggests further weakness. Sales in China, a critical market, dropped 17%, adding to investor concerns. Despite these headwinds, Nike's strong brand positioning and focus on direct-to-consumer sales may help long-term growth. However, near-term performance remains uncertain, given slowing sales and macroeconomic challenges.

From a technical perspective, Nike's stock price is struggling, trading below all major moving averages. The Relative Strength Index (RSI) at 38.93 suggests it is nearing oversold territory, but a strong reversal has yet to materialize. Short-term price action remains bearish, with the stock down -27.22% year-over-year and -5.04% year-to-date. Until a significant support level is confirmed, further downside is possible. I personally own a small number of Nike shares, and while feeling the burn from the recent dip, I plan to average down by buying more at strategic levels. Keeping my position small has been a relief, allowing me flexibility in managing risk.

Given the current setup, a firm bearish bias remains in place. A trade idea could be a bear put spread—buying the $70 put and selling the $65 put for a defined risk, targeting a continued move lower toward $68. For a more aggressive approach, traders could consider shorting Nike below $70 with a stop-loss above $74.50, aiming for a $65 downside target. However, for those looking to average down like myself, identifying a strong support zone, possibly around $68 or slightly lower, could present a more favorable entry point. Monitoring upcoming earnings reports and global retail trends will be key in making better-informed decisions.

For long-term investors, Nike still holds strong brand equity and market dominance. If the stock stabilizes near its 52-week low of $68, it could present a buying opportunity for those with a multi-year horizon. However, given the weak earnings outlook and technical downtrend, waiting for clearer signs of stabilization before initiating a long-term position is advisable. For now, traders can lean bearish, while long-term investors like myself may want to stay cautious, averaging down at strategic levels and closely watching for fundamental improvements.