2 American Express Charts Worth Watching

Eagle Bay Capital founder and Market Technician JC Parets tracks the performance of the Dow Thirty, and recently analyzed American Express Company AXP.

The chart shows a failed breakout in June 2014, which Parets believes has caused some troubles in the underlying trend. On top of this failed breakout, American Express is “putting in a bearish momentum divergence and relative strength broke a 3 1/2 year uptrend line.”

All these negatives, the report states, “have suggested a sideways market,” which is exactly what was seen.

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Parets concludes: “Shares continue to successfully test support from the lower end of this huge range since 2013. With momentum putting in bearish divergences this entire time and relative strength breaking the uptrend from the 2011 lows, I see little reason to force this long, but with an upward sloping 200 week moving average, I see no reason to be short either. I would continue to focus on the daily chart and approach this one more tactically.”

Short-term, Eagle Bay wanted to maintain a more neutral posture, “particularly with a flat 200-day moving average."

The analysts add that the patience has paid off.

“We've only wanted to be long above the lows from a year ago (shaded in gray), which are also the highs since late February. Below that and we still do not want to be involved, especially with momentum confirming these lows and a neutral structural picture,” they explain.

Parets’ trading idea: “I would let things settle down here and see little reason to be short. When we have more information then we can make a better decision. At this point there is nothing to do but I would be buying a breakout above last month's highs for a mean reversion back up towards 86, but this is becoming less and less like a good risk reward.”