Nike Stock Looks Set to Add to 2017 Rally

Nike stock could continue to rise as bearish sentiment unwinds

Apr 18, 2017 at 10:14 AM
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Nike stock took a sharp bounce near the round $50 level last November, even as Barron's waxed pessimistic on the stock in early December -- saying "Bottom-fishers beware." While the stock got knocked lower in March by a negative earnings reaction, it found support at $54.50 -- site of its January highs. With this new floor put in place, a level that could be reinforced by the hefty amount of put open interest at the underfoot April and May 55 strikes, NKE stock seems set to add to its impressive 9% year-to-date gain. 

nke stock chart april 13

There's ample cash sitting on the sidelines that could help fuel NKE's fire, too. Short interest has surged 60% year-to-date to 39.7 million shares -- the most since 2010. Should the stock continue to rise, a capitulation from some of the weaker bearish hands could translate into fresh tailwinds.

Plus, there's plenty of room for a round of bullish brokerage notes to draw buyers to NKE's table. Despite the stock's show of strength, half of those covering NKE maintain a "hold" or "sell" suggestion. Upgrades could boost the shares.

It's a prime time to purchase premium on NKE stock, too, considering its Schaeffer's Volatility Index (SVI) of 16% is docked at an annual low. Simply stated, historically low volatility expectations are being priced into NKE's options. 

Subscribers to Schaeffer's Weekend Trader services received this commentary on April 16. 

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