Top Dow stock Nike drops after earnings. Hold out for a longer-term rally, market watcher says

Nike was under pressure after the bell Tuesday even after topping analysts' earnings and sales estimates for its recent quarter.

The market watcher who called for a near-term pullback still sees a longer-term rally intact.

"Longer term, the stock looks quite good," Matt Maley, equity strategist at Miller Tabak, told CNBC's "Trading Nation" on Tuesday. "The stock's just been playing catch-up here and on a longer-term basis the series of higher highs and higher lows it's been making bodes well for the stock as we move forward."

Before this year's rally, Nike had underperformed the broader market. Its shares were flat from the beginning of 2016 to the end of 2017, while the S&P 500 ripped 31 percent higher.

Nike has raced higher this year, scoring records and topping out the Dow Jones Industrial Average as its best performer. Its rally had Maley worried about a near-term pullback heading into earnings.

"The stock is getting a little bit overbought on a near-term basis so you might see a little bit of a pullback," he said.

Its relative strength index, a measure of momentum, has traded at elevated levels for much of the year as its stock saw a rapid rise with little volatility. Its RSI reading of 62 on Tuesday pushed it close to overbought conditions.

Nike's launch of an advertising series featuring controversial football player Colin Kaepernick earlier this month had some investors worried its brand could take a sales hit. However, Michael Binger, president of Gradient Investors, sees that move helping company growth, not hurting it.

"Fundamentals are very strong, especially in the all-important North American market," Binger said Tuesday on "Trading Nation." "The Kaepernick ad has actually reinvigorated the brand more and added to that momentum."

The stock plummeted below $80 earlier this month after the ad's launch over Labor Day weekend. It has since rallied more than 7 percent its Sept. 4 lows.

While Binger is bullish on the company's operations, he is cautious about buying into the stock after its breakneck rally.

"If I was looking for a fresh money idea I don't think Nike would be the play here. It's ran too much in the past 12 months. So if you own it, keep it. If you're looking for fresh money, find another idea until you have a better entry point," said Binger.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's Closing Bell (M-F, 3PM-5PM ET). In addition, he contributes to CNBC and CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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