Profit-Taking May Offer Traders a Great Deal on AXP

by Sam Collins | January 22, 2014 1:23 am

American Express (AXP[1]) — On Oct. 17, this investment-grade global credit card and travel-related services stock broke from a five-month consolidation on heavy volume. I recommended the stock[2] the next day with a 12-month target of $96 and a trading target of $86.

In late November, AXP announced an agreement with U.S. Bank to accept their credit cards on the American Express network. Analysts are of the opinion that this new arrangement will enhance the experience of AmEx cardholders since U.S. Bank is renowned for its rewards and discounts. Wells Fargo (WFC[3]) also partnered with American Express in August.

The consensus estimate is for earnings of $5.46 per share in 2014, up from $4.91 in 2013, and $6.06 in 2015. S&P has a “five-star strong buy” on the stock with a 12-month price objective of $109.

On Dec. 27, I wrote[4], “AXP’s high-volume breakaway gap from a quadruple-top has been confirmed by a powerful rally within a new bull channel.”

And last week, the stock reversed from the bottom of that channel, opening a continuation gap at $88.24 to $90.55. Continuation gaps most often are closed by profit-taking, so Tuesday’s low at $89.64 follows that pattern. 

Buy AXP under $88.50 with a trading target of $100. Longer-term investors may hold for S&P’s target of $109.

AXP Chart
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