Medium term
Trade view / 26 September 2014 at 13:23 GMT

Mastercard charges lower, breaks key support

Trader / TheSteadyTrader.com
United States
Instrument: MA:xnys
Price target:
Market price:
Background

Shares of global payment solutions company Mastercard (MA) dropped 3% on Thursday, cutting below a key support line. Active investors and traders now have a defined risk trade setup on the short side.

The stock prices of credit card providers like Mastercard and Visa have seen massive gains over the past few years, but the action has been decidedly more muted in 2014. 

On the weekly logarithmic chart below, note that the stock topped in January after a too-quick rise and began a mean-reversion move to the 2010 support line. Since then, the stock has mostly traded sideways below the support line. 

In the bigger picture, if (and it's a big if) the stock wants to mean-revert lower in a more meaningful way and consolidate some of its four-year rally, then the sideways consolidation move this year was a good start. In other words, intermediate trend changes don't happen overnight.

Mastercard
Source: Saxo Bank

On the daily chart, which is where my focus for this current trade setup in MA lies, the stock has traced out a narrowing wedge for much of this year, with the medium-term moving averages (50-,100- and 200-day simple moving averages) all trading closely together. 

With Tuesday's drop, the stock fell out of this wedge and now looks to have room towards the $70 area as momentum could accelerate.

Mastercard
Source: esignal

Management and risk description

The biggest risk to this trade, considering the still-constructive pattern of the broader financial sector, is that Thursday's breakdown was just a fake-out move that quickly gets recaptured by the bulls. Should this happen, the bear case for the stock's near term would be off again.

Parameters

Entry: Short the stock using the CFD at $75.50 or lower.

Stop: $77

Target: $70

Time horizon: Two to four weeks.

— Edited by Michael McKenna

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Disclaimer:
Non-independent investment research
This investment research has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Further it is not subject to any prohibition on dealing ahead of the dissemination of investment research. Saxo Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. » Read more
5y
Ann Smith Ann Smith
I don’t like using credit cards. It’s not very convenient from financial side. You repay more than you have to pay. That is why I prefer taking short term loans which I take on this web-site: http://personalmoneyservice.com/. These loans are very convenient because you don’t have need to go to the bank and to take loans. It is possible to do 24/7 via internet.
2y
Serge Tesla Serge Tesla
I just got an offer for a loan with a 250% APR If i could afford that then I wouldn't need a loan in the first plac. Even if they do "low monthly payments" its not worth it. http://paydayloansinternet.com

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