Nike Shows Consumers Ready To Spend Big

Hey 5-Star Trader,

“Tuesday Trade” Journal: One of the most important concepts in trading is to review your work, and learn from the good and the bad. Identifying what is working is critical — to do more of it. So, to lead by example, each Tuesday, you’ll get a trade from my trading journal, in which I explain my thought process from start to finish. Trading is all about finding something that works, and applying it over and over again. That’s how you find trading success. So study up on this “Tuesday Trade” and let’s get to work.

Today, I want to show you something a little different and outline my Nike (NKE) stock pick.

As life begins to return to normal, consumers have shown the market they have capital and are ready to start spending. This is largely due to the lack of opportunity to spend money during quarantine. All the money they would have spent on vacations and other recreational activities was otherwise saved. Now that they are able to spend regularly again, they have done so in huge quantities. Because of this, I knew I wanted to add a long-term stock pick in the consumer discretionary sector into my portfolio.

On May 18 I decided on Nike for three distinct reasons… 

The macros… 

The macros behind Nike were compelling. As previously mentioned, consumers were excited to bounce back from the pandemic and they had more disposable income. Couple those reasons with the fact that Nike (in particular) has a very loyal customer base, and I felt as though this was a good pick. 

The technicals… 

Next on my checklist is the technicals. Nike again passed the test. It had an oversold volume zone oscillator (VZO) in addition to being in a squeeze.

The fundamentals… 

The last thing I look for in a stock pick is the fundamentals. After running Nike through my Hot Zone Indicator, I saw that over the last three quarters Nike beat earnings. This demonstrates customers were still buying the shoes through the pandemic and probably even more so now that things are opening up.

The day of earnings… 

On June 24 Nike reported earnings. As expected, they beat earnings and experienced an explosive upward move (pictured below).

One day later the stock was up 15%. Not a bad return for a little over a month’s time!

Though I’m happy with my quick percentage gain, I’m not selling. I believe this stock will increase its value over time. So for the foreseeable future, I’ll be holding this in my portfolio.

Last call! Tomorrow I’m starting my Quarterly Profits live-trading! Join now and get access to two days of live-trading where I will deep-dive into the run into earnings as well as trade the actual report in real-time.

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