We all naturally gravitate toward stocks that can make us
money by moving higher in price. However, there are always stocks
available to make us money when they move lower, and right now
credit card purveyor
is one of them.
Visa, as well as its peers, had a rough go of it in March,
losing more than 15% from its March high to its low on April 11.
, which my colleague David Sterman profiled last week, wasn't
immune.) On the way down, Visa sliced through chart support at
roughly $212 and left its 50-day moving average in the rearview
mirror. It also moved below its 200-day average before rebounding
with the broader market.
#-ad_banner-#Financials as a sector continue to lag, so V is
fighting an uphill battle that it is likely to lose. It is
currently trading just below its former support level, which is
now acting as resistance.
Normally, we'd have to give the bulls the benefit of the doubt
here because the stock did not fall soon after reaching this
plateau. The reason we can't is that volume during the rebound
rally declined each and every day. This is the hallmark of a
corrective bounce rather than a bullish turnaround, and it
suggests there was not an increase in demand at recent "sale"
There is a sentiment condition that is also working against
Visa. Stocktwits, the social media site for stock traders,
reports a 91% bullish reading by its users. When sentiment on any
stock or market gets that lopsided, we have to be concerned that
everyone who wanted to get into V has already done so. That
leaves little demand to push prices higher and flashes a warning
There is also a long-term condition working against the stock.
We can argue that the January and March peaks formed a double-top
pattern that was confirmed with last month's breakdown. Making it
worse, the decline broke a three-year rising trendline to the
If the market stays strong, then Visa could be pulled higher
to negate all of these breakdowns. But with a lagging sector and
serious technical damage on its own chart, that seems like a long
Action to Take -->
-- Sell V at the market price
-- Set stop-loss at $220
-- Set initial price target at $185 for a potential 12% gain in
This article was originally published at
Much-Loved Stock's Chart Flashing Multiple
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