Avoid Nike Stock After Bank of America's Imprudent Update

Nike (NKE)  shares popped by 3.9% on Tuesday, after Bank of America (BAC)  analysts made positive comments about the athletic apparel manufacturer.

According to BoA, “We think the recent pullback since Q1 earnings presents a particularly attractive buying opportunity." 

The investment bank maintained its buy rating on the stock.

Wrong for Too Long? 

Apparently, Bank of America has had a buy rating on Nike since April 11, 2024. Over that time, the stock has dropped from $92 to about $63.50, a decline of 31%.

Bank of America touted new Nike products, and the marketing opportunities presented by the upcoming 2026 FIFA World Cup, which will be held in North America.

Shares of the Beaverton, Oregon-based company have fallen by over 50% over the past five years. Over that same period, the S&P 500 has nearly doubled, gaining 91%.

I understand the allure of the Nike brand, the significance of the swoosh. I even opened an unsuccessful long position in the stock earlier this year.

Individuals like myself need to cut losses when we’re wrong, but Bank of America seems determined to hang in there. Is the high degree of conviction demonstrated by the investment bank commendable, or imprudent? 

A Technical Foul

Nike’s charts tell the tale. This stock has been in a relentless downtrend (black dotted line), shown here on the weekly chart, since early 2022. 

Zooming in to the daily chart, a series of lower highs (LH) and lower lows (LL) have formed over the past three months. This matches the very definition of a bearish trend. 

Nike’s bounce on Tuesday originated from an oversold condition (point A), according to the stock’s relative strength index (RSI). Despite the bounce, Nike remains in an overall bearish trend.

Nike’s declining 50-day moving average (blue) appears ready to cross below its declining 200-day moving average (red). This potential crossover (circled) acts as yet another bearish momentum indicator. 

The Michael Jordan Factor

Part of Nike’s mystique is its connection to Michael Jordan, but the Chicago Bulls legend last laced up his shoes in a professional NBA game in 2003. His last championship was in 1998.

This means nobody under the age of 25 can recall having seen him play, except on highlight videos. No one under the age of 30 can remember Jordan winning a championship.

Fashion trends are driven by the younger generations. Jordan will always be a legend, but are young people today as motivated to own Air Jordans as their parents once were? 

Bottom Line

Nike may benefit from new products, from FIFA 2026, and from investors diversifying away from tech. All of those factors may work in Nike's favor. 

But if Nike was about to reap a windfall from any or all of the above, that would likely be reflected in the stock's current price. If institutional investors were scooping up shares, that would be reflected in Nike's chart. Until Nike demonstrates some positive price action, I'd avoid the stock. 

At the time of publication, Ponsi had no positions in any securities mentioned.