Visa Faltering As The Market Hovers Near Highs
Visa (NYSE: V) is an example of an institutional darling that is struggling to hold its nose above the water despite the rising tide of the market.
Visa shares have been under a pressure over the last month or so despite the fact that the broader market has been on fire to the upside of late.
Visa has broken back down below its 200-day moving average line and appears to technicians to have another seven percent of downside room before strong support comes into play. What could be causing this bearish trading in such a bullish market condition?
What The Bulls Are Seeing…
The bullish crowd around Visa stock maintains that the macro trends still favor the credit card processors despite any news-driven sell-offs that may occur in the short term. The main trend they point to is the continued move toward mobile computing, mobile shopping and mobile everything. People are on the go and have to pay for things in a hurry and rarely do so with cash anymore.
Those macro trends in conjunction with huge profit margins, zero debt, and massive operating and free cash flow numbers embolden the bulls despite any short-term sluggishness the stock may be enduring.
Technically, the bulls would be hard-pressed to find much evidence in their favor. The stock may have some horizontal line support at just below $210, but it's hardly indicative of bullish action in the stock when you are having to guess where it will bottom when the market is testing the highs.
What The Bears Are Seeing…
The Visa bears point to the ever-growing specter of identity theft and cyber-attacks on the part of the U.S.'s enemies overseas. Those issues seem to be growing in frequency and severity, and are certainly making themselves more apparent on the nightly news.
That potential negative cloud is exacerbated, the bulls say, by rich valuations (price-to-sales at 10.73 and price-to-book at 4.86 for Visa) and very weak short-term technicals.
Who will win out in this battle of the wills?
Technicians are saying that Visa shares appear destined for a downside test of $199.97 support –- the fulfillment of an “abc” downside formation in development. Any breakdown below that would spell real trouble for the stock and likely for the broader market.
The bulls would only reclaim the flag if Visa shares can take out the $225 resistance level on the upside.
It appears that Visa shareholders may have a rough ride in the short-term -– no matter how bullish the macro trends may be for those “buy and holders."
Those not yet involved with Visa on the long side may be getting a rare gift by the market if they can enter down near $200. Just be careful and honor thy stops!
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