Tuesday, July 13, 2010

Credit Card Processors Visa (V) and Mastercard (MA) as Potential Technical Short Setups

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Visa (V) and Mastercard (MA) are always top of mind when considering names to add to the long side of the portfolio as they have a virtual oligopoly (not quite a duopoly but close!), and some saucy profit margins. About 6 weeks ago there was some fear of a quite significant blow to the fees charged on the debit side of the business in "fin (non) reg" but apparently the lobbyists won again (shocker) [Jun 21, 2010: Lobbyists Win? Mastercard, Visa Explode Upward Intraday]  Electronic Payments Coalition (yes that's the real name) wins again. (remember, all you are doing with a debit card is taking out money that is YOURS, on the exact same network that already exists for credit... so any fees for this are effectively handouts)

Either way, these 2 names are hedge fund honies, populating the lists of top holdings of countless of the top funds; oligopolies with huge moats are cool like that.  I was surprised when looking at their charts they have not bounced back more strongly.  In fact, one could potentially say they are setting up for a nice technical short trade.  Mastercard (MA) in particular has me torn.  This one truly could go either way - the bulls have a potential double bottom around $194... the bears have obvious resistance just above. 



Visa (V) is slightly better but not much more so... a tad closer to resistance of the 200 day and it did not make a lower low versus May... but we're stretching to find much difference here among the two.


A month or two from now it will be "so obvious" what the right choice (long or short) was. ;) Obviously in the student body left trading environment we now live in, if the S&P 500 starts a new leg up after this dead cat bounce, these 2 names will also push through resistance and anyone trading on technicals (resistance overhead) will be "wrong" as resistance will be broken.  But within a vacuum, in a world where all correlations are not 1:1, these both look very appealing in the near term from the short side.  I'm mulling.



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