November 13, 2018

NKE Doesn’t Have the Traction Anymore

VantagePoint Trading Software is a forecasting tool that uses both end of day data and artificial intelligence to provide traders a forecast of market movement. These forecasts are 1-3 days in advance and help traders improve their timing on making trades and maximizing profit potential. The artificial intelligence software forecasts market movement for stocks, futures, Forex and ETFs.

Monday’s broad market rout cannot be blamed exclusively on Apple (NASDAQ: AAPL) and chipmaker worries, with global growth (as well as the Fed) appearing to influence sentiment. That’s getting a boost this morning on reports that China’s Vice Premier Liu He and U.S. Treasury Secretary Steven Mnuchin spoke by phone for the first time in months about a possible deal that would ease trade tensions. Liu is also expected to visit the U.S. for talks ahead of a planned Trump-Xi meeting at the G20 summit on Nov. 30.

*Source:  Seeking Alpha

Let’s consider Nike (Ticker: NKE):

The VantagePoint platform recently indicated downside momentum.

Using the predictive indicators embedded within the VantagePoint platform and its predictive AI technology, we will point out three significant things. We have a bearish crossover indicated by the blue predictive indicator line crossing below the black simple moving average on November 12th.  We can combine that with the VantagePoint propriety neural index indicator moving from the GREEN to the RED position on November 9th.  This indicator measures strength and weakness for a 48-hour period, in this case, weakness.  The move to the RED position further makes the case for a potentially bearish scenario. We also have the predicted high and low below yesterday’s actual high and low indicating further weakness.  I want to play the VP bearish indication.

Strategy Discussion

If you are strictly a stock trader, simply selling NKE in the $75.25 area is a prudent move.  You are anticipating a move to the downside.  It is always a good idea to enter a buy-stop order to mitigate potential losses.  Placing that sell-stop in the $77.00 area will achieve that goal.

For active traders with a shorter investment time horizon, you can consider a setup utilizing options. Given the market conditions outlined above, taking an active, premium debit approach may be the best path to success.

Because of the reasons given above, the purchase of a debit put spread may be one way to approach this situation.  You will first want to calculate your target strike.  In order to do this, you will need three pieces of data:  current price, expiration date and the implied volatility associated with that expiration date.  For NKE, that yields a targeted strike of ~$73.00.  You may want to consider the NKE November 23rd weekly expiration 73/75 put spread, buying it for $0.50.  The most you can lose is the premium paid and the most you can gain is the width of the spread less any premium paid.  Max risk = $0.50 and max reward = $1.50.  This means that you are getting odds of 3.00:1.

Given the trading and market environment outlined above, a trader must evaluate whether this reward/risk ratio is appropriate for his/her risk tolerance.

If you would like to learn more about the VantagePoint platform and take advantage of the exclusive offer that our clients enjoy, please visit:

https://discover.vantagepointsoftware.com/prosper-demo/

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about the author:

Mike Shorr

Since 1994, Michael has been an on-the-floor market maker, Vice-President of Interest Rate Derivatives for Knight Financial Products and Director of Education and Options Instructor at Trading Advantage. He makes the oftentimes complex world of options and trading accessible to the novice and advanced trader alike. Michael has a Bachelor of Science degree in Statistics and Finance from the University of Illinois Champaign-Urbana. He presently is Director, Trader Education at ProsperTradingAcademy.

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