Visa Inc (NYSE:V) has had a choppy 2016, but Visa stock is 3% higher year-to-date, and the bigger-picture uptrend remains intact so far. More importantly, further gains look likely.
There has been plenty of reason for concern around V stock over the past 12 months or so, and the stock has indeed been capped since last fall. Yet the inability of Visa stock to break its longer-term support lines argues that traders should still play the trend higher for now.
When Visa reported its latest quarterly results on April 21, investors took profits the following day. However, at the same time, a host of analysts including Goldman Sachs and Cowen & Company kept their buy ratings and upper their price targets on V stock.
Trend following as an investment and trading strategy can be one of the most lucrative and straightforward of strategies — if done properly. In essence, this strategy banks on the fact that the trend (up or down) remains “your friend” until it ends.
Because only a few stocks currently have a well-defined uptrend, if you see one — and we do in Visa shares — you should follow this strategy.
Visa (V) Stock Charts
On the multi-year weekly chart, we can see that Visa’s blue 100-week simple moving average has held as support since 2014. Every time V stock has fallen into this moving average, a V-shaped bounce has taken place.
The general longer-term uptrend in Visa stock is also easily identifiable with simple trendlines that define the uptrending range. Until V stock breaks and holds below the blue 100-week MA, the stock by definition remains in an uptrend.
On the daily chart, we see that after V stock broke back above its blue 100-day MA in March, the stock continued a steep rally until April 22, when it gapped higher following the earnings report. The stock has been consolidating ever since, but in May found support at the yellow 50-day simple moving average.
Over the past few trading sessions V stock has been consolidating in an even tighter range just shy of the $80 mark and a push past this line could quickly get the stock toward its next and first upside target near $81.50, which would also satisfy the filling of the April 22 downturn.
If Visa stock can sustain the momentum from there, a next upside target in the $85-$86 area comes into focus.
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