Dow component American Express Company (AXP) has risen by more than 35 points in March, a three-year low in the $60, but faces significant obstacles in the coming quarters, increasing the potential for profitable short sales. This downside could unfold before the end of the second quarter, due weekly relative strength readings are probing the overbought levels, even if the three months of growth has not managed to dislodge strongly bearish readings on a monthly basis.
Rival Mastercard Incorporated (MA) and Visa Inc. (V) are better able to survive and thrive in the coming years, with strong digital payment systems that have become even more attractive due to the pandemic around the world. During this time, American Express remains highly dependent on business travel, which may never return to pre-pandemic levels, because many companies to quickly adapt to the virtual meeting world.
Of course, other travel-oriented companies have taken a beating so far in 2020, with the decline in revenue and transactions, which translates directly to lower the Amex benefits. A sense of normalcy has returned to the globe in the past month, but it could still take years for the airline, the accommodation and food to recover. This could reduce the company’s main sources of income in the coming years while increasing the chances for eventual distribution through the March lows.
AXP Long-Term Chart (1991 – 2020)
The stock ended a four-year downward trend to a multi-year-low of under $5.00 at the beginning of 1991, the entry of a bullish trend that has mounted the 1987 high in 1995. The momentum traders then took control of the ticker tape, carving a powerful advance that has made a long-term up to $55.15 in the third quarter of 2000. The decline found support in the low $20s after the Sept. 11 attacks in 2001, which gives a strong rebound.
A successful 2002-retest reliability has attracted steady interest from buyers, which underlie the remarkable progress made through the mid-decade bull market. The upward trend has completed a round of travel in the 2000 high in 2006 and broke out in a rally which has failed after the addition of only 10 points. The declining trend in the subsequent accelerated by the 2001 low during the economic collapse of 2008 before coming to a stop at a 14 year low in the first quarter of 2009.
A rebound in the new decade finally reached the 2005 high in 2013, the immediate sale of derivation, that are shown upside-down in the third quarter of 2014, when the stock topped once more. Subsequent selling pressure and finished at a four-year low in the first quarter of 2016, while aiming at the interest of the buyers have resumed after the presidential election. The wave carved a steady bull market advance, which has published a series of new highs in January 2020 all-time high of $138.13.
The monthly stochastic oscillator has carved a complex selling pattern since reached a very overbought technical reading in January 2018. The series of lower highs and lower lows has not yet reached the level of oversold, increasing the chances of additional downside in the coming months. Short-term price action has reached and reversed at the 20 month simple moving average (SMA) at the same time, indicating that the recovery may have its course.
AXP Short-Term Chart (2017 – 2020)
A Fibonacci grid extends over the first-quarter swoon places of the stock at the .50 retracement after a reversal at the .618 retracement level. The 200-day exponential moving average (EMA) crosses this area of conflict, underlining its importance in the development trend, because the moving average has been broken on heavy volume in February. Two-way action in the last week mark the first phase of a test again of the resistance, at the end sealing the fate in the third quarter.
The balance volume (OBV), the accumulation-distribution indicator of the end in a strong accumulation phase in May 2019 and has failed to come out with prices in January 2020, the establishment of a bearish divergence that warned of the weakness of institutional sponsorship. The decrease, of the ended of the divergence, to the abandonment OBV the weakest since the month of September 2017. It has made little progress over the last three months, despite the big rebound, while increasing the chances for a resumption of the decline.
The Bottom Line
American Express stock faces the same obstacles that other travel-oriented businesses, increasing the chances of a profitable short sale.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.