The past couple of months have been choppy … heck, even the past year and a half has been a rocky road for stocks in general. Some stocks, however, have managed to buck this chop and continue trending higher unabated and in a well-defined manner. Mastercard (NYSE:MA) stock is one such example. Over the past few weeks, MA stock has once again reached the lower end of this strong trend, which now offers traders and investors a chance to follow the trend at better prices.
Trend-following — the idea of simply riding a trend in an asset higher or lower — is one of the most consistently successful strategies. But the trick to this strategy is to “manage” the trend and not just blindly buy and hold and hope for the specific trend to continue. Mastercard stock is a good recent example of a trend-based asset that needs to be managed and monitored closely in order to stay in tune with the trend.
MA Stock Charts
For perspective, let’s first look at a larger-picture multi-year chart. Here, we see that MA stock has had a steep ascent over the past few years, but also that this trend did not come without any pauses.
In fact, MA stock, much like the broader stock market, endured a major jolt in the fourth quarter of 2018, during which it was difficult for most trend followers to remain in this position … unless they managed it properly.
A key attribute of successful trend following strategies is to take partial profits as the stock reaches the upper end of its trend and then again when it brings the trade up to a full position at the lower end of trend. This not only allows us to take profits along the way but also gives more wiggle room should the asset temporarily overshoot on the downside.
On the daily chart, we see that Mastercard stock has moved higher in a well-defined trend throughout 2019. The lower end of this trend channel is marked by the blue 100-day simple moving average. While it is entirely possible that this up-trend in MA could soon come to an end, the reality is that the lower end of the range has offered support so far. In other words, the trend in Mastercard stock should, as the popular trend-following saying goes, “remain our friend until it ends.”
Thus, MA stock could be bought here at the lower end of the range around the $267 -$272 with a first upside target around $290. But in my eye, the best attribute to this trade is the very well-defined stop-loss area: We know exactly where to get out in case the trend ends. Namely, any break and hold below the $265 area would be a violation of trend and would trigger a stop loss for MA.
Stocks could see volatility in October, but there is one market — not the stock market — that is trending strongly higher and could offer massive gains for investors. Join me on a special webinar Thursday, September 26, where I lay out the details of this rare trend-following opportunity.
Special webinar: The best trading opportunity of the decade: Thursday Sept. 26th. Register here.