It's So Perfect, We Should be Scared: V and MA Dissected.
I have no doubt that my stance today on credit card names Mastercard Inc. (NYSE:MA) and Visa Inc. (NYSE:V) is a minority one. I'm equally sure it will be an unpopular one. It's just that after too many years of trading (and observation of others' trading), I've learned some lessons that are applicable to V and MA today.
And what are those relevant lessons? That Visa and Mastercard are both - if you're long - worthy of selling today.
I know, I know.... both stocks are red hot, not just today, but for the past few months. Visa Inc., for instance, has advanced 27% since August, topping it off with today's 2% pop. Meanwhile, Mastercard Inc. shares are up 1.4% to bring the eighteen-week total up to a 24% gain. Why would you want to get out while the gettin's good, especially when analysts upgraded both of them today in the shadow of measurable revenue and earnings growth that's been unfurling for years? There is an answer.
I say this with 100% seriousness - this may be about as good as it's going to get for shares of MA and V right now.
Don't misunderstand. This isn't a judgment call on either company, nor is it a long-term call. It's a short-term observation that all the potential good news that could be reflected in the stocks' prices is now packed in, and then some. Charts of each also look overbought right now. Indeed, today's bars - though bullish relative to yesterday's - are suggesting that today's the top... the last hurrah. Specifically, Mastercard have not only left behind a second bullish gap in six trading days with today's move, but we're seeing a doji bar for Wednesday's session so far. The same goes for Visa. Worse, though the session is nowhere close to being over yet, there's little volume for such big bullish moves; the gains may not be all that well supported.
All that being said, there's yet-another reason now may be the best time to shed these two credit card names - analysts have announced their love for them.
Yes, I'm still being serious. I know in a perfect world a stock would only go up after a bullish upgrade. This isn't a perfect world though. Analysts are notoriously late to the party, if not completely wrong. Indeed, analyst opinions can sometimes be the ideal contrarian clue.
Don't believe it? Take a look at the chart of Visa below. On it are all the major upgrades and downgrades it's been through since late 2009. The bullish upgrades are green upward-pointing arrows, while the bearish stances are marked by red downward pointing arrows. The bulk of the crowd waited too long to get bullish, missing the 2009 rally. Worse, just when the crowd did get bullish in early 2010, the stock got hammered in May of that year; one analyst did manage to downgrade the stock after the fact. Though one analyst accurately went bullish in October of 2011, another went bearish immediately after. One of the was obviously wrong, as was the analyst that went bearish in July of 2012, steering investors out of the stock right before a 27% rally. Now - in the shadow of such a huge move - one has to wonder if today's upgrade is as misguided as the early-2010 bullish outlooks were.
I'm willing to bet it is. And yes, Mastercard's history with poor analyst calls is just as alarming.
Bryan Murphy is a paid contributor of the SmallCap Network. Bryan Murphy's personal holdings should be disclosed above. You can also view SmallCap Network's complete disclaimer and disclosure.
Do NOT buy or sell V or MA until you have read everything.
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| Date: | May 19, 2013 | |
| Price: | Free | |
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Worthless
Technical price analysis is one of the worst ways to decide whether you should buy or sell a stock. If technical price analysis were somewhat meaningful for anything but HFT you wouldn't need to buy and sell stocks. You would just need to create a computer program to buy and sell based on technical aspects.
Your interpretation of analyst upgrades/downgrades is grossly bias towards the negative. Not that I believe the opposite. Simply pointing out how lacking your article is.
Lastly, why is this article even on SmallCapNetwork? Visa is $100b+ market cap. By no means small.
Overall this article is worthless. Sorry if this hurts your feelings, but it is the truth. You are also likely wrong. Investors have been waiting for a pullback for over two years without much luck.
