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.


Raj said...

Nice work. I noticed the same and came to the same conclusions about Visa's potential. I'm hoping good news in the next 1-2 months to push this stock well above $64. Based on MA's results 2 months after IPO, Visa's on track. Let's hope the company is strong enough. I'm long on the stock for now. Thanks for the analysis you did.

Phileo said...

Hi Raj,

You're welcome, and thanks for reading my blog!

Oh said...

do you have any newer info?
as we've all seen Visa broke $80 today....interestingly enough, there was a huge 96K sell order @74 placed today! snap!