Visa Inc (V) Stock Is Pointing Lower. MUCH Lower.

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Shares of payments technology company Visa Inc (NYSE:V) have enjoyed strong gains among a strong price trend in recent years. But as upside momentum began to wane in 2015 for the broader stock market, Visa stock began to look less stable under the surafce.

Beat the BellNow, after a few months, a top has formed in V shares, and the path of least resistance is lower.

Much lower.

When Visa reported its latest earnings on Jan. 28, the company beat earnings estimates by a penny per share, but sales of $3.56 billion were below analyst estimates that called for $3.62 billion. While Visa kept its fiscal year outlook unchanged, it did warn that growth trends were weakening, and that might affect results going forward.

The multiyear trend of consumers spending more with credit and debit cards as opposed to cash has helped propel Visa’s top and bottom lines and thus its stock price. However, a cyclical downturn in the economy will likely also hamper growth in this space and should thus at the very least keep a lid on Visa’s share price.

This brings up an important point that is often either ignored or forgotten by financial pundits; cyclical downturns or bear markets tend to pull with them just about everything regardless whether labeled a growth or value stock. Sure, some stocks might fall less than others, but gravity still weighs on the broader stock market.

Visa Stock Charts

Moving on to the charts, from a multiyear perspective, we see that V stock’s rise from 2011 to 2015 took place in a strongly trending megaphone pattern. What’s a megaphone pattern? This pattern simply shows a steepening of the rise in the latter stages of the trend, which ultimately and just about always ends in an above average correction as gravity kicks in.

In other words, when the rate of change of a stock price goes from moderate or orderly to steep the stock isn’t too far away from losing steam.

Visa stock chart weekly
Click to Enlarge

On the daily chart, we see that V stock’s rally in the fourth quarter of 2015 could have been the last hurrah for some time. The stock has since mean-reverted to the diagonal black support line, which increasingly looks vulnerable to snapping.

See, the more often a line of support gets tested, the weaker it ultimately gets and the more severe the breakdown of the share price.

Visa stock chart daily
Click to Enlarge

Last Friday, Visa stock 2.9% among a broader technology growth stock selloff. Active investors looking to play V stock to the short side now have two options:

  • Wait for Visa stock to break below the  black diagonal neckline/support line around the $69.50, or
  • Begin initiating a small short position around current levels, looking to add upon a break below $69.50 and thus a confirmation of a trend break.

A first price target in the mid-$60s could be used.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/02/visa-inc-v-stock-is-pointing-lower-much-lower/.

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