By Stephen W. Cox, CMT
Traders who relish risk are liable to find plenty of it that now that shares of credit card companies, which have racked up enviable gains over the past year, are now losing upside momentum on the charts and I conclude that a correction is imminent.
But risk in this case is the fact that shares are consolidating near uptrend highs and so sales are strictly aggressive.
The weekly chart of MasterCard (MA) shares makes the point of waning upside momentum explicit, that is, the six chart bars at the top of the uptrend. Their horizontal march across the chart betrays uptrend exhaustion. I call this phenomenon a “drifting top.” It’s notable that the bar of three weeks ago, the trend high, reached up just above $535.00 before losing more than half of that week’s gain, an instance of what some traders call a “rejection of the high” of last week in this case. And in case shares of MasterCard should break down on the weekly chart then shares will be targeting $485.00, an interim low.
As if no trader ever experienced market risk the daily chart of American Express (AXP) shares is a reminder that selling is a risky play with the attendant heightened risk. Last week shares managed a breakout from a nearly one-month-old trading range between $58.57 and $60.50. But the respective highs of Thursday and Friday, practically identical at $62.00, formed a slim double top on the daily chart. The consequence is likely to be a revisit the $60.50-$58.75 trading range.
Finally, shares of Visa (V), seen on the daily chart, perhaps are most encouraging to sellers given the virtual white dotted triangle that caps the long bull market since late September. As of late January the lowest of the three channel lines failed to support the weakening shares. I calculate that shares are targeting minimum support at $151.00 at least, a logical profit-taking point. A lower move would be targeting $146.00 given the large triangle, I believe. Anyway, a hit on support at $139.00, if it came to that, would be the signal for shorts to cover in anticipation of a new uptrend.
Stephen W. Cox is a Certified Market Technician who covered the markets for Dow Jones Newswires for nearly two decades. He can be reached via email at StephenWCoxCMT@yahoo.com or on Twitter @StephenWCoxCMT.