A historically bullish signal is flashing for the footwear stock
Blue-chip retailer Nike Inc (NYSE:NKE) hasn't had much luck in 2022, with a bear gap sending the stock back below the formerly supportive 200-day moving average earlier this week, and a sizeable 9.2% year-to-date deficit already under its belt. Investors shouldn't fret just yet, and in fact, Nike stock's pullback might just present the perfect buying opportunity for bulls wanting to get in on the shoe stock without paying sky-high premiums.
This is because the shares just came within one standard deviation of their 260-day moving average after a lengthy period above the trendline. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, the stock has seen four similar pullbacks within the past three years. One month after three of these occurrences, NKE was higher, averaging a return of 7.1%. From its current perch at $151.28, a similar move would put NKE just above the $164 level.
The aforementioned bear gap came after HSBC came in with a downgrade and price-target cut, citing concerns over supply chain issues. However, this analyst could be the outlier, as only four of the 22 in coverage call NKE a "hold," while 18 "buy" or better ratings are on the table.
Options traders have been much more pessimistic, and an unwinding of some of this sentiment could put some wind at the equity's back. The stock sports a Schaeffer's put/call open interest ratio (SOIR) of 1.00, which stands higher than 90% of readings from the past year. In other words, short-term options traders have had a much bigger penchant for puts than usual.
It might be a good idea to speculate on Nike stock's next move with options. NKE's Schaeffer's Volatility Index (SVI) of 22% stands higher than just 12% of readings from the past year. In other words, options traders are pricing in relatively low volatility expectations at the moment.