Shares of Nike just entered into a technical crossover that has some worried about further downside for the stock.
On Wednesday, Nike moved into a “death cross,” an indicator in the charts that occurs when a stock’s 50-day moving average breaks below its 200-day moving average. In other words, Nike has traded at a lower average price in the past 50 days than it has in the past 200 days.
Such an event is typically seen as bearish, as its ominous name would suggest. It comes as the Dow component is on pace for worst week in about two months.
Matt Maley, equity strategist at Miller Tabak, pointed out the move in a note to clients on Wednesday as the action was underway.
“The stock is seeing a ‘death cross’ today … and it is testing its lows from May & June (just below $51),” Maley wrote, adding that the stock was also testing its 200-week moving average, an even longer-term smoothing mechanism which the stock has not traded beneath since 2009.
Notably, he wrote that if shares of the athletic apparel company fall further beneath some of these key support levels, such as the 200-week moving average, “anytime soon,” “even the most strident bull will have to consider throwing in the towel on the stock.”
“Nike has obviously been a stock that has gotten a lot of attention this year … given the wild swings it has seen. (It began the year with a 16% rally … which was followed by a 14% decline … which was then followed by a 19% rally … and it has been falling since early August and now stands 15% below its summer highs),” he added.
Still, the stock is appearing a bit oversold on a near-term basis, Maley said, suggesting that perhaps a bounce is in store.
This week, a poll conducted by Piper Jaffray of 6,100 teens found that athletic apparel’s popularity among the demographic is waning. Though Nike retains its top spot as the preferred apparel brand for teens, the name has lost share in the rankings; 23 percent of survey participants said Nike was their favorite, down from 29 percent.
Earlier this year, the company said it would cut about 2 percent of its global workforce, sending shares falling. The stock has also faced several analyst downgrades this year, most recently from Susquehanna analyst Sam Poser who said Nike sneakers are forming something of a supply “glut” as demand slows.
The stock was trading about 1 percent lower Thursday, at $50.60 per share.