Through thick and thin, the financial technology sector remains in favor on Wall Street. Companies like Visa (NYSE:V), Mastercard (NYSE:MA) and Square (NYSE:SQ) rarely come under fire from negative outlooks, so they make for strong bets on the upside potential of equity markets.
Source: Kārlis Dambrāns via Flickr
Fintech offers the best of both words in the financial sector: They are prone to rallies and not considered dead money like bank stocks. When it comes to Visa stock specifically, it rallies similar to the Nasdaq Invesco QQQ Trust (NASDAQ:QQQ) and outperforms the Financial Select Sector SPDR ETF (NYSEARCA:XLF).
In fact, yesterday, it set a new all-time high while the S&P 500 is still struggling to breach last year’s neckline battle zones. Clearly, investors want to own more Visa stock and MasterCard than most other sectors.
So is it too late to buy V stock? The answer to this varies from one investor to another and depends mostly on time frames.
How to Approach Visa Stock Here
Those who want to invest in it and own the shares for the long term, the simple answer is that it’s not too late to own it. Over the span of years, I don’t need to be surgical with my entry points. If the stock market is higher later, then so is Visa.
For that purpose, even though V stockis at all-time highs, it is not expensive. It’s cheaper than MA and sells at a trailing price-to-earnings ratio of 34. While this is not dirt cheap, since it’s almost double that of Apple (NASDAQ:AAPL), it’s not bloated either. So owning shares here for the long term is not likely to be a major financial debacle. There is not a lot of froth to lose so the downside risk should be limited
Short term, chasing a runaway stock like this at all-time highs is not ideal. It leaves the buyers’ portfolios vulnerable to short-term dips. But then again, here the matter of intentions makes a difference.
For those who are looking to trade Visa stock and not necessarily be in it for the long-term investment, then going long Visa stock here would be a tactical trade. The idea is to buy high and sell higher. But for that, we need precise levels to mark the stop loss points.
Bottom Line on V Stock
To understand the support levels we need to know how the rally up to here unfolded. V stock is now 25% off its December lows. But the breakout really started from $140 per share on Feb. 1 and after its earnings report. That level was a neckline with $146 per share as the target. So those are two major lines of support for the mid-term.
More recently, a secondary pivot level developed around $145 per share. The bears tried to break on Mar. 8, but the bulls prevailed so that now becomes an important level to hold. If it fails in the near term, it would target support at $140.
On the lower time frame charts, there is a shorter-term recent level of contention at $149.70. This served as the floor for the recent poke to new all-time highs. So by default, this becomes the first level of support and if fails, it should also be the stop loss trigger for momentum traders. This does not affect those who are in the stock for the long haul.
There is also another micro support zone between $151 and $152 per share that is an even tighter stop loss levels for momentum traders. Where I stop myself out depends on my own level of risk tolerance.
The first stop, however, remains in my overall thesis on Visa stock and my goals for the trade. I need to know if I am trying to trade it or invest in it. It is also important that if I am in it for a trade that I don’t turn it into an investment.
Nicolas Chahine is the managing director of SellSpreads.com. As of this writing, he did not hold a position in any of the aforementioned securities. You can follow him as @racernic on Twitter and Stocktwits.
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