A stock down 80% from its peak looks like a bargain.

Sometimes it is. But many times it is not.

Before you buy one, check an important element a stock chart leaves out, and that LikeFolio has special insight into: word on Main Street.

Namely demand, sentiment and macro consumer trends.

If you checked those yesterday for Nike, you would have successfully avoided a dangerous trap for traders: catching a falling knife.

Here’s how we do it in house:

NKE Shares Sink on Earnings (as Predicted)

Nike hit its lowest price in 13 years today, after a weak quarter and an even weaker outlook.

The company failed all three of our Main Street checks.

Check 1: Demand – Are Shoppers Actually Buying (without discounts)?

Here is the data we saw yesterday prior to earnings: while NKE said it was transitioning to be a premium brand, discounts were actually stacking up.

Traffic alone can fool you.

More people visited Nike online than a year ago, and at first glance that looked like a turnaround.

But dig deeper. Nearly a third of Nike’s US catalog sat on sale this summer, up from about a fifth a year earlier.

Shoppers who come for markdowns cost a company its margin.

Nike’s chief financial officer said on its earnings call that Nike is “taking discounts and resetting the marketplace, which is dampening gross margins.”

Check 2: Sentiment – What Are Shoppers Saying?

We read what people post about Nike.

Before Nike reported, we told Schwab Network viewers: “we’re seeing a lot of value hunting and discounting.”

Not only did value hunting dominate, but sentiment at large surrounding the brand was declining.

At Wimbledon, defending champion Jannik Sinner bled through his white Nike shoe on Centre Court…and tennis fans noticed.

We also noted Nike’s lifestyle sneakers and Jordan Brand were “still really, really struggling, not really resonating with consumers.”

On its earnings call, Nike said sales of its sportswear line, just under half of its business, fell by a low double-digit percentage last quarter. Jordan Brand sales fell by a mid-teens percentage.

Check 3: Trends – What is driving purchase decisions at a high level?

Mentions and demand data showed shoppers want new shoes from newer brands.

Dick’s Sporting Goods (DKS) told investors that athletes are “increasingly responding to newness, innovation and a broader set of brands,” and that “legacy footwear silhouettes” are piling up.

We tied those shoes to Nike when Dick’s reported months ago.

Nike’s chief executive, Elliott Hill, confirmed it on Nike’s call. He said Nike has been “oversupplying our iconic retro product.”

Athletes are moving too. Nike let soccer star Kylian Mbappé go, and he signed with Swiss running brand On (ONON).

Shoppers followed him. In the three days after Mbappé signed, searches for On ran more than three times their usual pace in Italy, France, Spain and Brazil.

Bottom Line: Sometimes a stock is cheap for a reason

A cheap stock can always get cheaper.

We called out a bearish position heading into earnings, and we were right.

Nike’s finance chief expects its cleanup to “probably bleed in a little bit into fiscal ’28.”

Our LikeFolio Score for Nike, a 0 to 100 read of consumer demand and sentiment, sits at 46. We will look again when Nike’s demand, sentiment and trends turn up.

Right now, with all three pointing down, we wait.