Last time I wrote about Nike & Under Armour, both of them were in downtrends. I thought it might be good to compare the charts for these two similar retailers. Rather than looking at a singular stock, I sometimes find it helpful to compare charts for similar companies and see if their chart activity looks comparable.

Nike – NKE

This is a 3 year weekly candlestick chart for Nike (NKE). While NKE is approaching the $50 price area I’ve mentioned in previous articles, its MACD Histogram is still showing increasing selling momentum. There has also been a lot of selling volume over the last 7 weeks. I don’t think the $50 area is going to hold for NKE.

Analyzing Nike’s Downtrend Using a Fibonacci Extension Tool

Now that some additional time has passed and more chart activity can be monitored, the 161.8% Target Line from the Fibonacci Extension Tool looks like the destination for this downtrend. Its share price will most likely see some sort of bounce around the $50 area, a nice round number. The green trendlines are other areas where I think NKE’s share price may bounce at during this downtrend as well on its way to the 161.8% Target Line.

If I were to look at the above chart from the perspective of my 3 volume spike theory, the second volume spike in the sequence most likely formed 2 weeks ago. That volume spike is similar to the volume spike that started the downtrend. You are probably asking what about that green volume spike? I think that spike is the beginning of a Wave B in a Double Zig-Zag wave pattern. I think with the MACD Histogram showing increasing selling momentum and lots of selling volume, the $50 area is not going to hold.

NKE has found support at the $50 area twice before. Once during the August 2015 flash crash and then just recently in June 2016.

Overhead Resistance Trendline – NKE

At the very minimum before going long, wait for the MACD Histogram’s selling momentum to start slowing down on its weekly chart. I would also wait before going long on NKE until it breaks through its overhead resistance trendline. You would want to see the break occur on buying volume that is heavier than normal.

Nike’s Overhead Resistance Trendline

For anyone wanting to trade bounces, I would wait for a break below $50 to the $45 – $47 area and then play the bounce back towards $50. Its a small trading window. Otherwise, continue to wait until signs of bottoming area taking place and then start to scale-in to go long.

Under Armour (UA)

I really wish that when a company had a stock split, trading platforms could automatically move all your trendlines. I have a lot of analysis for UA that I still need to “move down” from before its stock split. I’ve had too many other things on my plate to take care of trendlines for UA. Like website performance, users getting locked out, switching web hosts, etc…on a side-note, it is nice to have my website up and running again without any issues so far with the new webhost.

This is the same time period chart for Under Armour (UA) as it was for Nike above – a 3 year weekly candlestick chart.

Using Fibonacci Extension Tools to Calculate Probable Downside Price Targets For UA

The above trendline analysis combined with the Fibonacci Extension Tools indicates that the best area to start to go long again for UA is around the $30 – $32 area. That is where an initial scale-in purchase could be made to go long shares of UA. But that is only if other bullish reversal signs are flashed in the area. And I would only make that initial scale-in purchase about 10-20% of the total shares you want for UA.

Extra purchases should be saved for the $26 area. You may even want to save the initial purchase for this area if you are less aggressive and looking for a longer-term “investment”. Look at the convergence of the two Fibonacci Extension Tools – the 100% Target Line from the black tool and the 161.8% Target Line from the blue tool. Convergence areas tend to be magnets for share prices.

Elliott Wave Analysis – UA

The $26 area is the most probable price target from an Elliott Wave perspective. The first leg down on UA’s downtrend from $54.70 in September 2015 to the $32.66 low is a decrease of approximately $22. Since Elliott waves like symmetry, this downtrend should also go down about $22. Since the current downtrend for UA’s share price started at $47.95 in April 2016, if you subtract the $22 that leaves you with about a $26 price target. $47.95 – $22 = $25.95

Analyzing a Potential Double Zig-Zag Wave Pattern on UA’s 3 Year Chart

Look for UA’s share price to re-test its $32.66 low from January 2016. I anticipate a break below the January low and possibly to the $30 area before finding strong support and bouncing. However, based on the Fibonacci tool analysis, keep in mind that the $26 area is the most likely target and the bounce from $30 may be short-lived. Take quick profits (10%) if trading the $30 bounce.

Nike & Under Armour – Summary

The charts for Nike & Under Armour look pretty similar at the current time, pretty bearish with more time needed to finish their corrective patterns. While both may have one more bounce in their share prices, don’t be fooled by the bounce. Make sure they break through overhead resistance trendlines before going long on either stock.

Because of the amount of time that both Nike & Under Armour have been in their downtrends, I would also consider waiting until a bullish reversal candlestick pattern develops on their weekly candlestick charts. You want to see the reversal on the weekly chart because this is a longer downtrend that needs to be reversed and we don’t want to be fooled by small, daily reversals.