Trading Adidas shares after the company cut ties with Ye

Lots of commotion surrounds Adidas (ADDYY) as the sportswear maker felt pressure to drop Ye – formerly known as Kanye West – from its lineup.

The company eventually did, but not without its shares paying the price. Shares of Adidas, the ADR unit that is traded here in the United States, have fallen in five consecutive trading sessions, including Tuesday.

Currently down around 3% on the day of the last check, this is much better than the 7.6% decline it posted near today’s open.

At this morning’s low, Germany-listed Adidas shares were down around 22% amid the stock’s five-day skid, while US-listed shares were down around 19% .

The company’s decision to cut ties with Ye came after “a series of media appearances in which he made anti-Semitic remarks”, as previously reported The street.

While the decision to end the partnership will result in a €250m charge for Adidas, the title isn’t reacting as badly as some would have thought. Let’s look at the graph.

Trading Adidas Stocks

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Adidas stock monthly chart (ADDYY).

Adidas stock did not perform well, but that’s no surprise. Nike (NKE) shares were also buried, suffering a 54% loss from peak to trough.

Currency issues, supply chain issues and the fight against a possible global recession had a negative impact on both stocks, although Adidas stock certainly took a bigger hit.

At this morning’s low, shares of the US-traded unit were down 67% year-to-date. Since the all-time high in August 2021, the stock is down 76% (and down in 14 of the past 15 months).

Unfortunately, when we take a look at the chart, Adidas broke below some pretty significant support levels in the middle of its decline. They include the $87.50 pivot level, the 200-month moving average, and the 78.6% retracement from the all-time high to the 2009 low.

From there, the bulls might be interested in the action, but it would be much more constructive to see Adidas stock rally back to $50 and the 78.6% retracement, allowing investors to use the recent low as a stop.

On the rise

On the upside, the more levels it can recover the better, but we should be aware that these levels can also act as resistance.

If Adidas stock can recover and stay above the $50-$52.50 zone, it could put $64-$65 back into play, as well as the 200-month moving average. Above this zone, the mid-$80s and the decline in the 10-month average could come into play.

If the shares continue lower, there is significant support in the $33-$38 region, but that would require a 25% drop from current levels (at a minimum).

The bottom line: With today’s reversal from the low and the news about Ye, let’s look at Tuesday’s low – $47.45 – as a line in the sand. Aggressive bulls who like Adidas can try to be above this level for a long time.

James T. Quintero