Medium term
Trade view / 05 February 2015 at 14:51 GMT

Visa's bullish resiliency sets up a trade

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

Shares of electronic payments network company Visa Inc. continue looking constructive after an already steep rally in recent years but the incline has been orderly and risk/reward levels are well defined.

On January 29th Visa reported better than expected revenue for the latest quarter and reiterated its outlook for 2015. The stock rallied in response and in recent days continued with follow-through buying that looks to have the potential to break the stock out of a multi-month consolidation phase soon.
 
From a multi-month perspective we see that Visa had a major breakout move higher last October, which took the stock out of a big multi-month wedge. By late December the stock had peaked and settled into a better consolidation phase. As a general rule, the type of breakaway gap that Visa stock saw in October is bullish through a multi-month lens, particularly if the ensuing consolidation phase has an orderly rhythm to it.

Visa Inc
Source: Saxo Bank

On the daily chart we see that after last week's earnings announcement the Visa stock gapped higher again and with Wednesday's nearly 2% rally broke out of a diagonal resistance line, which may also be labeled a bigger picture bull flag pattern. Regardless of the pattern name one assigns however, the important take away is that Visa broke out of a consolidation phase and is now tickling the all-time highs from last December. 

Visa Inc
Source: Saxo Bank

Management and risk description

Because Visa has not yet broken out to all-time highs, there continues to be risk that the stock consolidates further before ultimately heading higher.

Parameters

Entry: Buy the CFD at $265 or higher

Stop: $256

Target: $280

Time horizon: 1 - 3 weeks

— Edited by Clemens Bomsdorf

Disclaimer:
Non-independent investment research
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