Nike’s Stock Falls as Tariff Concerns Emerge
Recent market developments have significantly impacted Nike’s share price, placing the company in a challenging position as it navigates escalating tariffs.
Market Reaction to Tariff Announcements
Nike Inc. (NKE) shares experienced a sharp decline of 14% on Thursday, closing at $55.58, a level not seen since December 2017. This downturn is largely attributed to the recent tariff measures announced by the Trump administration, which are expected to affect the company’s profitability negatively.
As a result of the new tariffs, Nike’s manufacturing partners across Vietnam, Indonesia, Cambodia, and China will now be subjected to import duties ranging from 32% to 49%. Concerns are mounting that these increased production costs may lead to higher consumer prices, potentially affecting demand.
Increased Selling Pressure
According to analysts at Morgan Stanley, investors may be underestimating the impact these tariffs could have, particularly on Vietnam, where approximately half of Nike’s footwear production occurred in fiscal year 2024. The increase in selling pressure has been notable, with trading volumes exceeding average levels as the stock falls below critical technical indicators.
Technical Analysis of Nike’s Stock
Following a breakdown from a head and shoulders pattern last June, Nike shares have been in a downward trend. The recent price drop brought the stock below its 200-month moving average at the start of April, indicating a significant shift in market sentiment.
The Relative Strength Index (RSI), positioned below the 50 mark, signifies ongoing bearish momentum, and may suggest a nearing oversold scenario, increasing the potential for a short-term rebound.
Key Support and Resistance Levels
Support Levels
Investors should closely monitor key support levels at around:
- $50: This price level serves as a psychological barrier that aligns with the November 2014 peak and the lower range of a consolidation phase from 2016 to 2017.
- $40: If the price drops below $50, it may approach this lower support, a key accumulation zone based on prior upward movements.
Resistance Levels
On the upside, significant resistance levels include:
- $68: A critical level where multiple peaks and troughs have historically intersected, likely posing selling pressure during potential recoveries.
- $86: If bullish momentum returns, overcoming this level could allow prices to retest the neckline of the previously observed head and shoulders pattern.