American Express Company (NYSE:AXP) has spent the better part of the past four months in a consolidation phase. But AXP stock looks increasingly ready to resolve to the upside.
Shares of other payment processing companies such as Visa Inc (NYSE:V) and MasterCard Inc (NYSE:MA) rallied notably in recent days. However, American Express has been mired in a tight trading range. To me, that says active investors and traders should keep a close eye on AXP stock for a breakout trade higher.
Before looking at the charts of American Express stock, let me be clear: All stocks in an industry or sector don’t have to move up and down together. Investors can worry about plenty of systemic issues for any single-name stock. For example, see the recent divergence between pharmaceutical giants Merck & Co., Inc. (NYSE:MRK) and Bristol-Myers Squibb Co (NYSE:BMY).
Still, all else being equal — and systemic issues aside — a technically sound chart gives a stock like American Express a good chance of playing catchup with its competitors.
AXP Stock Charts
On the multiyear weekly chart, we see that after a yearlong topping formation in 2014, AXP stock finally began to cave in 2015. After all was said and done, the correction measured nearly 50%.
A 50% retracement of any rally typically is a good spot to look for an intermediate-term bottom. Also, the February lows in AXP stock also coincided with the low-end of a price range (blue shaded area), which had acted as resistance until early 2013 when a breakout took place. In other words, what used to be resistance may now have become support. This retest of former support tends to be a healthy signal in the longer-term.
Zooming into the closer-up daily time frame, we see that as a result of the multimonth consolidation phase — which in late June produced a pivotal higher low versus the February lows — AXP is now visibly coiling up below the black resistance line.
Over the past month, American Express has traded in a roughly two-point range. It also has tightened its trading range. At this point, it won’t take much for AXP to break past horizontal resistance in the high $66s. In fact, if one looks close enough, the stock might have already attempted this on Wednesday, as a first diagonal resistance line has been broken.
Active investors should look to buy AXP on a breakout for an initial move toward $70. Respect any major daily bearish reversal as a stop-loss signal.
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