Nike (NKE) has faced continued declines, down 30% YTD and struggling after four consecutive earnings-related drops. The global sell-off in name-brand and luxury goods has weighed on the stock, despite its relatively small short interest of 2%. Recent market signals, including muted price action and inconclusive short interest trends, provide weak indicators for a rebound ahead of earnings

NKE hasn't recovered since the last earnings report when the stock was down 7%. This compounded the negative returns from the three previous earnings reports. The stock is down 30% for the year, placing it in the 5th percentile.

This is part of the global sell-off in name-brand and luxury goods that we discussed in earlier research from the previous earnings reporting period.

The short position remains high, but it’s only 2%, which is relatively small compared to other names. The short notional has been constant, as the increase in shares has been offset by the lower stock price.

The stock has moved 6% on earnings, but options are pricing in only a 4% move, signaling a smaller expected move.

The stock follows a momentum pattern, with shorting on the way down and covering on the way up. This has contributed to the increase in the short position.

NKE does not follow the pattern seen in other stocks where short interest in the week prior can predict the return after. There is low correlation. However, the change in short interest this time is significant.

The price return is predictive, but this time, the price movement is less than 1%, which is also a weak signal for an upward move.

The model is either inconclusive or weakly forecasting an upward move, based on both the return and the short interest. The analysts covering the stock have only a few sell ratings, and this number has remained constant, so we don't see behavior that is typically correlated with shorting.

After holding steady for years, implied volatility has been ticking much higher, indicating increased expected risk over the longer-term horizon. In this case the implied volatility did not move with the short position but came afterwards.

The short interest and volatility are correlated usually in that investors use both to play the downside

Nike’s 2024 story is one of persistent declines, low short interest, and mixed market signals. Will this week’s earnings break the trend or further compound losses? For a free trial to S3’s Black App please type {APPS BLACK<GO>} on your Bloomberg Terminal.

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