Saturday, March 29, 2008

Visa Inc. (NYSE:V) Analysis

Summary -

- Defined resistance level in place
- possible support level exists, but is untested
- waiting for a fundamental event.

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Here is a chart of MasterCard Incorporated (NYSE:MA) just after its Initial Public Offering.

There are two things that I found somewhat interesting in the above chart:
- MA traded sideways for a couple months until a fundamental event occurred on Aug 3/06
- During this time of sideways trading, MA always stayed above the upper half of its OR (Daily Range of first day of trading).

Now compare that to Visa Inc. (NYSE:V):

While it's not a perfect match, I do see some similarities between how Visa has behaved with how MasterCard behaved the first week after its IPO:
- found resistance
- stayed above the upper range of its Opening range.

I interpret staying above the upper range of its Opening range as a good sign, as that means buyers are still acting aggressive with regards to this stock. However, in order for Visa to break above its resistance level @64.1-ish, it will require a fundamental event. An analyst upgrade from a big, well known brokerage house might do it, but what did it for MasterCard was an earnings beat.
Will Visa also report earnings that will beat expectations?
No clue. I don't even know when they will report earnings.
But for the sake of argument, let's pretend that for whatever reason, Visa was able to overcome resistance at 64.1 and ran up to $66-$67 on anticipation of a good earnings report. The earnings report disappoints expectations, and as a result, Visa drops 10% on the bad news. That would take it down to $60.

$60 also happens to be a level of possible support, so I will be watching to see how Visa behaves at around the 60-ish level (or even below), and buy if I see the rest of the herd buying.

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Sunday, March 16, 2008

Recession Watch: Bear Stearns catalyst


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I'm just settling down to read the news for the evening, and of course, front and centre is the big bombshell that JP Morgan (NYSE:JPM) is buying out Bear Stearns (NYSE:BSC) for a colossally mind-blowing $2 per share. We're talking about one of America's biggest, and one of the most well-known brokerage house, which was trading at $70 a mere 5 trading sessions ago, being reduced down to 2 George Washington's. I mean, at least Ambac (NYSE:ABK) took a few months before it dropped 93% of its market value.

As fundamentally astounding as this news is, the only thing that matters now is how the markets will respond.

Nikkei225 is down over 3%, and the HangSeng is down over 4% as a result of the Bear Stearns bailout. ES is down over 27pts, NQ is down over 42pts as I type this.

It's clear to me that the market wants to go down. The best case scenario in terms of a tradeable signal would be for SPY to open AND close below 127.5. Achieving that on over 500M shares would just be the whipped cream on top. That would mean that the buyers have all but retreated from the support level created on Jan 21/08 (that was the day Asian markets closed down over 5%). But rarely does it ever work out as expected, and with the PPT out in full force, I do think anything is possible for tomorrow.

The US FOMC meets on Tuesday. If the trendlines in the above inverse ETF's are still holding up well after the US FOMC meeting, I will look to enter positions in one of the above inverse ETF's on any reversals near the trendlines.

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