This emerging Nike competitor is set to break out ahead of earnings, according to the charts

Shoemaker On Holding AG burst onto the athletic shoe scene in the past two years and personally I’m a fan. Has the time arrived for the stock to break free from a range heading into earnings next week? I’m positioned for it. Following a ski accident and full ACL reconstruction they are the only shoes that allow me to run pain free on the treadmill, plus I think they look pretty cool. There has been much hype around this emerging Swiss company that grew revenues by 68% in 2022, 46% in 2023, and are expected to grow revenues by more than 25% in 2024 and 2025. This is all while running at about a 60% gross margin. Technically speaking ,that range of overhead resistance for On Holding (ONON) is easy to see on the weekly chart below. There was weekly downtrend line resistance originating from the 2022 high that was broken in Q1 ’24. What was resistance that’s broken flips to now serve as support. That zone of newly found support is in the $33-$31 area. Above us we have a zone of overhead price resistance from the past 12-months around $36-$37. If we can break away from the pack we should be able to move into the $40’s as this company continues to capture market share in the U.S. and abroad from the industry giant, Nike (NKE) . Nike stock has been lagging the benchmark S & P 500 and the shoe sub-industry group within consumer discretionary quite noticeably on the weekly Relative Rotation graph below. See how NKE is far to the left in the ‘lagging quadrant’? There has been quite a bit of negative press surrounding NKE for their lack of new product development and their heavy reliance on the legacy Air Jordan products. For comparison, I’ve included other shoe names such as Sketchers (SKX), Deckers (DECK), and Crocs (CROX). Believe it or not this industry group includes some companies that show very good trading and investing characteristics including solid revenue growth, good volatility, and solid follow through from technical breakouts. Take a look at the recent moves in SKX, DECK, and CROX. CROX reported earnings this morning and is trading higher by 7.50% as I type. On earnings ahead Heading into earnings, I think it’s wise to refer back to Q4 of 2023 earnings announced on March 12. The company missed consensus top and bottom line estimates. The stock gapped down in the morning, but was quickly bought up and rallied in the coming days. Why the reversal? The company guided higher to 30% revenue growth for CY 2024 and also showed the missed revenue and EPS was due to currency headwinds. A weaker U.S. dollar and a strong Swiss franc reduced the companies take home profit. This quarter is totally different with earnings out on May 14. The dollar has been rallying all quarter, weakening the swiss franc. I’m thinking the FX markets may be a tailwind for this report, but the market can also see this and the recent strength is this FX move being discounted. But I also think the possibility to gain additional market share from NKE and reach that 30% revenue growth target is possible and the topside range breaks. -Todd Gordon, founder of Inside Edge Capital, LLC DISCLOSURES: (Gordon owns ONON personally and in his wealth management company Inside Edge Capita. Charts shown are MotiveWave and Optuma.) THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.