Now let's compare that to Mastercard (MA) which my jaw dropped when I saw something that actually looked familiar to me, a potential gently forming bottom being created - key word gentle - versus the harsh reversals that now dominate this market. We see a stock here that builds a base over the course of a few weeks or months before turning back upward. I thought these sort of charts had gone the way of the Dodo bird.
Do my eyes deceive?
Now this is still a quite broken chart since we are making a series of lower highs, and most likely this move will go kaput (if technical conditions prevail) somewhere in the $260-$270s. The 50 day moving average is $260 and falling by the day. But at least it is something I recognize. On our earnings preview entry at the end of July we wrote
Mastercard (MA) - chart has been degrading here as well; I am praying for a "miss" or "guidance" that does not make people happy so I can load up at lower levels.
A few day laters after Visa (V) reported we wrote
I was hoping for some kind of miss from Mastercard so we could cheap up shares cheaper but it appears this won't be happening.
We got what was considered a "miss" in fact, and I began adding some in the $240 but was holding out for a test of the 200 day moving average as we wrote on July 31
Got my wish for some weakness in Mastercard (MA) stock post earnings, so added some this morning in the $240s. I haven't had time to look at the earnings but whatever the fuss is (I am sure it's a "slowdown" of one sort or another) I am ok with for the long term. I am not adding a ton here because this was a gap down in the chart, and there is better support in the $220s, but since we cut this name back sharply from our portfolio I'm willing to begin to layer back in with today's 10%ish haircut. We bought in the mid to low $240s and have taken our stake up from 0.8% to 1.4%.
So now we seem to have a successful test of that $220s level and the inklings of a bounce. We shall see - but this is a low risk position - if it breaks down below the 200 day moving average (mid $220s) we cut it back - no harm, no foul. But in this era of "compressed time where everything happens at 10x the speed of the old days" the 2 week base Mastercard is forming is akin to a 4 month base in the old days, so it's an easy chart to read.
We'll move up this position to 2.5% of the fund, and probably cut back as we enter that area of resistance north mentioned above. If it can break through there and get back to the upper $200s/$300 area than we have resumed a new trend up. But I'll assume we fail about $30 higher from here.
Unfortunately charts like this are few and far in between so easy entries are hard to find...
Long Mastercard in fund; no personal position
3 comments:
We seem to "agree to disagree" on this name. I'm worried that growth stocks will command much less of a multiple in coming months and at the same time growth prospects may decline.
Consumers continue to use plastic increasingly, but I contend that card issuances will continue to under perform as average credit scores drop to a place where no new credit can be issued.
I understand that MA has no credit risk, but they still face transactions not growing as fast if consumers lose access to that credit.
I would say "good luck with the position" but honestly I hope all your other positions turn out great and this one has more trouble :-)
Zach
Full Disclosure: I am short MA
Zach, I can see your side too, trust me. Since we're in a fundamental free zone the minute it drops below $220 I'll be cutting back, and I'd join you on the dark side (if I could)
The major risk I see in the US is credit card companies are now reducing limits for people. Big time. So that is the huge risk to me - but I like the global story still. This is just a trade for now, hoping to let some go in $260s - trying to squeeze out minor gains here or there.
I do still think more Americans will be using cards for basic everyday needs as they are crunched by inflation - err, by inflation that will disappear in a few months per CNBC pundits. So more and more of "spending" goes to credit (AND DEBIT). Now the question is we have 2 forces moving in completely opposite directions - restriction of credit on one side and desperate Americans needing to forestall day of destiny on the other. Which is the greater force is an open question
But those are all fundamentals and I leave those to old fogeys for now ;) When the chart says sell, I sell. That's the only way to survive for now.
Technicals look good. I like the chart. If it falls below 200 EMA I'd cut it.
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