Global payment firm American Express (AXP) reported third-quarter profits after the bell Wednesday, and AXP earnings beat expectations on just about every front. As a result, American Express stock surged more than 5% Thursday.
AXP reported a top line of $8.3 billion, vs. an estimated $8.22 billion, with sales up by 6% year-over-year. On the earnings front, American Express earned $1.36 billion, or $1.25 per share — 4 cents better than estimates for $1.21 and 15% improved from the year-ago period.
Credit card spending was 7% higher at AXP, which is a notable acceleration as customers have increasingly used credit cards as lines of credit. Credit expansion often is regarded as a positive sign if it comes in conjunction with at least a moderately improving economy.
On the charts, American Express stock really doesn’t show much for the bears to sink their teeth into — the stock’s relentlessly bullish run since the early 2009 bottom continues.
Big-picture, while certainly no exact measure of economic upturn, AXP does reflect both the direction and slope of economic growth we have seen since the depths of the recession.
Much of my analysis concerning whether a stock trades well technically and is well-bid from a technical point of view has to do with how orderly its incline is. Most of the time, this requires looking at a medium- to longer-term chart to gauge a stock’s character. Doing so on the multiyear chart of AXP reveals a stock that over the past few years has had four major consolidation phases that ranged anywhere from three to 12 months, and each of them led to significant breakouts.
This stair-step way of moving higher is healthy, and with Thursday’s breakout is still alive and well. Through this time frame, although quicker traders will always find profitable trades to the short side, in the grand scheme of things, American Express stock is not to be bet against, but rather, bought on dips.
On the daily chart, Thursday’s post-earnings breakout is notable and meaningful.
After overcoming its 50- and 100-day simple moving averages on Oct. 11, AXP gapped higher Thursday and opened trading above a resistance line that dates back to early June. American Express stock also closed near the highs of the day’s range, all of which came on heavy volume. If we study AXP’s breakouts over the past years on the above chart, we see that all of them eventually retested their breakout areas before moving higher again.
As such, with time frames of at least a couple of months, American Express stock could be bought at present, while those with shorter time frames might want to wait for a retest of the breakout area near $78 before buying the stock.
Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free Weekly Market Outlook Video here. As of this writing, he did not hold a position in any of the aforementioned securities.