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Dow Jones Forecast: Nike Earnings to Deliver Trade War & Retailer Insight

Dow Jones Forecast: Nike Earnings to Deliver Trade War & Retailer Insight

Peter Hanks, Strategist

Dow Jones Forecast:

  • Nike (NKE) will report earnings after the close and is expected to see $0.71 earnings per share on $10.45 billion in revenue
  • NKE accounts for roughly 2.25% of the Dow Jones Industrial Average, slightly less than Walmart
  • While trade tensions have cooled and headlines have improved, tariffs remain in place and will continue to weigh, and Nike could deliver a sobering wakeup call

Dow Jones Forecast: Nike Earnings to Deliver Trade War & Retailer Insight

The Dow Jones initially traded higher at the open before quickly retreating alongside the US Dollar as US President Trump took to the stage at the UN General Assembly on Tuesday. In his speech, the President covered a variety of issues, including the US-China trade war. On the matter, President Trump said he would not accept a partial or “bad deal” from China – even as the country look to resume purchases of US agricultural products.

Regardless of the current state of trade talks, tariffs are still in place and the companies that produce the goods subjected to them will continue to feel the consequences. Therefore, Nike could deliver a material update on the impact of the economic conflict when they report earnings after the close Tuesday. Despite the stock’s headwinds, option traders appear to posses a bullish bias as evidenced by the total call to put volume.

Potential Price Action After Earnings

According to Bloomberg data, NKE call purchasing surpassed puts by nearly 2 to 1 and total options volume was more than twice the average. Earnings-implied volatility hovered around 5% as the close approached, even as the broader VIX Index surgedalongside impeachment odds for President Trump. Nevertheless, NKE implied volatility was essentially even with the average after-earnings price move of about 4.85%. Looking then to the implied price range, a move within market expectations could see NKE trade as high as $91.24 or as low as $82.74.

Coincidentally, two notable price levels exist within this range. To the topside, the stock’s all-time high around $90 could look to rebuke an attempted breakout. If earnings impress and bulls can surmount the level, it could open the door for a continuation higher as the stock looks to cast aside a barrier that has held price in check since late March.

Nike Stock Price Chart: Daily Time Frame (September 2018 – September 2019)

Nike Stock Price Chart Daily

On the other hand, NKE shares may look to enjoy support around the $86.45 area, which has marked an area of buoyance for the stock throughout September, but now resides dangerously close to trading price and could be easily dispatched. Thus, subsequent support around $84 could prove to be a more likely area where bulls look to make a stand.

Either way, traders who are looking for insight on the US-China trade war should closely monitor Nike’s findings. In the past, Nike was among a long list of shoemakers and retailers that urged President Trump to remove tariffs as they would be “catastrophic” to the industry. With roughly 23% exposure to China, the world’s largest footwear company could offer anecdotal evidence the conflict has materially impacted their profit outlook – a bearish development to be sure.

That said, Nike shares trade near all-time highs and Wall Street analysts have commended Nike’s positioning in the trade war as their pricing power looks to insulate them from deeper trade war concerns. For further updates on the company that finds itself on the frontlines of the US-China trade war, follow @PeterHanksFX on Twitter.

--Written by Peter Hanks, Junior Analyst for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX

Read more:Dow Jones, DAX 30, FTSE 100, S&P 500 Forecasts for the Week

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