The past six months have handed shareholders in Visa (V) some great gains.
Recently, the card payment services provider’s share price has gained over 25% from late October to its February high.
It has even overtaken JPMorgan (JPM), with its market cap soaring well past half a trillion U.S. dollars.
After hitting its all-time high on February 28, though, Visa pulled back due to declining momentum.
So today, I want to check Visa’s chart to see where things might be heading from here…
A Strong Second Leg
The chart of Visa below shows a classic uptrend in action.
From March to April last year, VISA slowly ground higher. A pullback and period of consolidation followed (typical in longer-term rallies). Then Visa resumed its uptrend in October.
The 50-day Moving Average (MA, blue line) below highlights this trend…
Visa (V)
Source: eSignal
The 10-day MA (red line) crossed the 50-day MA back and forth in the first stage of Visa’s rally (and through its consolidation phase).
Yet the rally’s second leg that kicked off in late October showed more consistent strength.
During the second leg, the 10-day MA crossed above the 50-day MA. It then continued to accelerate higher, dragging the 50-day MA up at a much steeper angle than during the first leg.
The other difference between these two legs is the action of our momentum indicator, the Relative Strength Index (RSI).
In the first leg, the RSI stayed in the upper half of its range most of its time (above the green line). But it still tested and fell through support multiple times.
This highlighted a lack of ongoing conviction from buyers.
But in the second leg of Visa’s rally, the RSI stayed in its upper range throughout the entirety of the move.
Take another look:
Visa (V)
Source: eSignal
Yet while Visa’s stock price was climbing up to its peak in February (upper orange line), the RSI showed momentum was declining from overbought territory (lower orange line).
When the RSI is falling like this despite a climbing stock price, a correction is often in the cards.
And that is what we saw.
But after slipping down, Visa’s pullback petered out just over a week ago. The RSI retested and held support.
So what am I looking for next?
Free Trading Resources
Have you checked out Larry’s free trading resources on his website? It contains a full trading glossary to help kickstart your trading career – at zero cost to you. Just click here to check it out.
Maintaining Momentum
One of the major signals I watch is momentum (RSI).
The RSI held support yet again. So I’ll be looking for it to remain in the upper half of its range for Visa to continue its rally.
The next test for Visa is to take out its February 28 high ($286.13).
I’ll also keep tabs on the MACD.
As the chart shows, since February, it has been meandering lower. The blue MACD line recently fell below the orange Signal line (red circle).
If the MACD can break back above the Signal line and accelerate higher, that will give further evidence that Visa’s rally is resuming.
Regards,
Larry Benedict
Editor, Trading With Larry Benedict