Visa and the temple of doom

May 19th, 2010 – Comment

  Hello Lou, I have been following your  posts  for a few months and I always find your analysis helpful. I was wondering what you think of Visa as a value option now that it has taken such a nosedive in the last two weeks. The decline has come on the heels of a vote […]


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visa

Hello Lou,

I have been following your  posts  for a few months and I always find your analysis helpful.

I was wondering what you think of Visa as a value option now that it has taken such a nosedive in the last two weeks. The decline has come on the heels of a vote by the Senate to put limits on debit card fees.

What are your thoughts?

Scott

 

Hi Scott,

Visa Inc. (V NYSE) has had a great ride but as you have identified the bloom is off the rose and you are looking for a bottom. Jordan Kotick, Global Head of Technical Analysis at Barclays taught me many years ago that you must confirm the bottom not anticipate it.Lets see where we might find an entry point.

v

The three year chart tells the tale of great wealth generation as V bounced off a hard bottom in January of 2009. But that advance has stalled and the stock has been melting through support like hot magnesium. V fell through $90, $87.50, $85, and $80. It did find support at $75 after it bounced off $70. Talk about a free fall! All since April 26!

 

 

v2

The six month chart provides a close-up of the selling and the signal from the MACD that it was time to pay attention and consider your options. V then proceeded to breach the 50 day moving average,  continued to sell off till it caught a bounce off the the 200 day moving average then broke down on the news of the change in the regulatory environment.

I think that you want to watch the $75 level and see if V does an Indian Jones and pulls itself onto the thin ledge and begins to move sideways. If it can’t hold $75 – it will test $70 where it has a wider ledge to hold on to.

Not to put too fine a point on the discussion but you don’t want to find new lows with your money. Be patient and look for a confirmed trend reversal and don’t take a head fake.

 

Happy Capitalism!

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