Most investors would be hard pressed to find many similarities between Nike (NKE) and a company like Research in Motion (RIMM). One still maintains a bright future while the other doesn't even have the certainty of being financial steady in the years ahead. However, for the time being, their stocks have one thing in common. That being the threat of a continued downward trend in shares.
For Nike, its quarterly report after the closing bell on Thursday was very disappointing on a number of fronts. First, earnings missed by a sizable 20 cents accompanied by a disturbing deterioration of gross margins. For those looking for any positives, revenues did increase 12% in the fourth quarter. However, that alone was hardly enough to keep the stock near the $100 level.
Even more troubling for near term share price movement is the fact such high expectations currently surround the company with the approach of the 2012 Summer Olympics in London. For instance, Forbes still holds a $111 price target on shares with the main reason being the significant growth anticipated because of the games. Still, with such money being spent in approach of the games, Nike would need the Olympics to have a sizable impact on sales and revenue to merely match expectations. Anything less would prove detrimental for shares and would easily take the company multiple quarters to recover from. All the while leading to a potentially high risk, high reward investment that remains expensive with shares still hovering near $90.
As for Research in Motion, hopes to capitalize on the proverbial dead cat bounce may prove misguided. Mired amidst lows not seen since 2003 and constantly losing market share to other giants like Apple (AAPL), attempts to even make a small profit day trading shares should be avoided at this time.
For those interested in potentially rewarding future trades with these stocks, Nike should find strong support at $80. That level being one in which shares have either maintained or quickly recovered since September of 2010. As for Research in Motion, those willing to take on the high risk should look to buy at $5. A level which shares will probably see by the end of the year and a level which will typically entice bargain hunters.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
