I believe NKE currently presents a wonderful potentially 10 bagger opportunity with a high likelihood of seeing a short squeeze in the coming weeks; we could see the price go to 82 from 68 (extreme case), which is a 20% gain on stock.
1. Basic Long Term Support
https://preview.redd.it/t142umsdt9ie1.png?width=666&format=png&auto=webp&s=25060af42d12b18cbd72865620bf5d931f2abf9d
200-month EMA support
Basic long term support level for reference, at this level institutional actors are active as it provides clear technical reference. We are only in the first week of the month so it is left to be said if we may close above it or not.
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2. Analysis of the Price Action & Technical Setup
https://preview.redd.it/wtc29ulet9ie1.png?width=1555&format=png&auto=webp&s=6a0e09bc3a6ebbf0d63d7e58a0f41027c6a2d703
**- (Neutral Signal) Volume Profile Analysis:** currently we have a break below the 6 months volume profile value low, in English this means we had a breakout to the downside; as you may know, most breakouts fail and lead to strong reversals (ie. bull/bear traps). so now we should be asking "hmmm does this feel like a true breakout?" Nevertheless the breakdown means major funds will be alerted as most funds have protocols on alerts of new lows, so more eyes are now assessing the situation and readying to play.
**- (Neutral Signal) Extreme Volume:** the volume on Friday is comparable to earnings volume, which is almost 3 times the average volume; this is quite significant, the likely explanation is that since the price made new low, it triggers many natural stop losses for the entirety of the last 6 months. This effectively has shaken out near all "weak hands" in the entire range. The abnormal volume could signal capitulation and selling climax (see section on darkpool orders for whether the selling is controlled or panic).
**- (Buying Signal) Dark Pool Accumulation:** go to 5 seconds time frame if you can, and inspect the order blocks during the day and especially near close, you will see huge blocks at 69.50 69.00 68.70, perfect whole numbers of large size typically signal dark pool blocks, the planned manner with a tightening range is a classic bottom fishing behaviour, it generally means that the buy side is taking advantage of the extreme selling by "letting the price to come to them" in a controlled way.
**- (Buying Signal) VWAP:** price settled nicely on Friday right on -2 SD VWAP (6-months anchor from the June 2024 quarter), which is a classic technical level for mean reversion players to enter.
**- (Buying Signal) RSI:** 1-hr and 4 hr RSI are at extremely oversold levels, this coupled with -2 SD VWAP shows a powerful signal for buying.
https://preview.redd.it/u7ezp41gt9ie1.png?width=1427&format=png&auto=webp&s=9a64d6e49b7e6b18e728e10618f78346b726cb62
**- (Buying Signal) Clean Technical Low:** the price broke below 6-months low, actually it broke 5 year low as it is only higher than the covid panic crash; at this new low, it provides an intuitive an natural area for short sellers to cover. This along with the fact that the price is at -2 SD VWAP, means we have a confluence of buying interest from mean aversion long traders, value investors, and short seller covers.
https://preview.redd.it/45kh0e5ht9ie1.png?width=1487&format=png&auto=webp&s=e8c0b96c38739f8c6eae5652650a509b6b533ef7
\- (Buying Signal) Put/Call Interest: the put call interest for next week has a singular peak at 70 strike, and the ratio is 20 to 1, this is HIGHLY significant as naturally the 70 is the nice and clean floor for the range and put sellers understandable congregate at that level. As the price drops near 70, the short put will be increasing in value, and the put seller option makers will delta hedge by shorting the stock, at 70 these put sellers will have effectively completed there delta hedge, so they will no longer be compelled to do more selling (you should paste this to an AI chatbot for clarification as it can explain the concept in detail). The put sellers will not wish to sell the stock even lower as that would mean there puts will be exercised and they would rather the put be expired worthless.
If you inspect the price action on Friday, it is clear that the selling pressure sits EXACTLY at 70 (ie. where the buying attempts failed and the selling pressure brought the price down to 68.6).
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3. Analysis on Trader Category & Trade Psychology
This section outlines the expected psychology and positioning of the major players in the market.
\- Institutional Players: Clean technical level, alerted of the new low and is aware of the nice -2 SD value area. Could be instructed to rebalance or rotate over the weekend. The technical indicators support oversold status on multiple time frames.
\- Value / Long Term Investor: the new low provides a natural place to average down for players who have more tolerance for volatility and longer time horizon.
\- Hedge Fund / Option Makers: Put sellers have finished the delta hedge, and no need to short the stock more since it is below 70; if the price rises, these put sellers will have to cover their hedge position by buying the stock back. This accelerates as we break 70 and above.
\- Short Sellers: the new low provides a natural place to cover the short positions without feeling like you missed out; short sellers also compete with each other who can close the position at the best price, as being late means you have to cover high.
\- Retail: most likely their stop losses have been taken out by the breakdown, and now they have forced capitulation. This means selling pressure has been reduced dramatically. Many people are waiting for 65, but the interest at this level is simply too obvious, and the market may have no interesting in letting the obvious deals occur. It could as well bottom at 68, and reverse, leading to FOMO of those prospect longs to buy back higher.
**All in all, we have the possibility of an interesting confluence of multiple parties nearly all aligned for "Buying" - this means strong and quick moves to the upside.**
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4. Prediction
First few days next week we will likely see:
\- Battle of 69 & 70: the buy side is setting a controlled bottom at 69, the initial sellers at 70 are "option makers" who are not yet completed delta hedging their short put; if 70 is breached and holds, then those put sellers switches from sell side to buy side, as now they must cover their short positions. We Could see in the open a quick test of 69 as the support, if it is brough up, we will test 70.
\- Battle of 71.5: this is the volume profile value low, if the resistance is strong and LOTS of sellers jump in, this actually validates the breakdown, as the old range is rejected; so this will likely be the first major hurdle. If this breaks then we likely see a retracement from 72.5 (-1 SD VWAP) to 71.5, if 71.5 becomes support, then we likely go straight to the POC at 75 with little resistance.
\- Gap to 75: the above situations might occur on monday or tuesday, then if all goes well 75 could be a nice place to gap up to overnight, then the spring is loaded and we move quick to VWAP at 77.5, potentially overshooting to 78.
\- Consolidation at 78: this is the first level where profit takers should emerge, could be a nice place to take short term positions off the table.
\- Burst to 81-82: It is also possible for the spring move to send the price to the +1 SD VWAP level, which incidentally is also the 200-day EMA, this provides a super natural resistance and a great place to profit take all the position.
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5. Gameplan
\- If you enter below 70, set your stop loss at 68, and watch 70 and 71.5 closely. The price should bounce between 69 and 71.5 as the battle plays out, if 71.5 is breached, move your stop loss to 70. Now you are in guaranteed profit.
\- If you enter later, set your entry near 71.5 after the successful breach, the price should retest that level to validate the fact that the volume profile range is still in play, set your stop loss at 70.
\- If we have breached 71.5 then a reversal is almost inevitable as the shorts on Friday are absolutely trapped and shorts from 78 to 72 are getting nervous, and potentially looking to cover. Now you should be considering exit strategies at 75, 78 and 81.
\- For call buyers i recommend buying some 74C expiring in 2-3 weeks, as most short squeezes complete in 4-10 trading days. You could also consider buy weekly put at 70 when the price tests 71.5 as a hedge for continued breakdown.
\- If all goes well, your 74C could be netting 5 to 10 to 20 times return (depending on the degree of the squeeze).
I hope someone finds this post interesting, good luck boy!
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6. Position
https://preview.redd.it/ky17kalrt9ie1.png?width=723&format=png&auto=webp&s=d835b5c577587f493c8805b96c087459db050b31