Visa Looks Strong

 | Feb 22, 2013 | 10:00 AM EST  | Comments
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Although some indices suggest that we should be looking for a bit of a corrective decline in many stocks, Visa (V) remains in a very strong position. I'm looking at a well-defined, relatively low-risk setup here.

What we are seeing in V is actually a retest and hold of a key time and price low made Feb. 13. First, the stock tested and held key price support at the $153.05-$154.40 area. The actual low was made at $154.14, which was directly within this zone on Feb. 13.

Besides the price support, we also had the coincidence of key timing relationships at this low. The timing factors included a prior corrective decline that lasted 22 trading days into the June 1 low. When I projected 100 % of that cycle from the Jan. 1 high, it gave me Feb. 12 as one key time cycle. Note that the Feb. 13 low was 23 trading days from the Jan. 10 high. This is illustrated on the daily chart below.

Visa (V)
Source: Dynamic Trader

We also had a 0.618 time cycle of the Nov. 15 low to the Jan. 10 high come due on Feb. 13.

Finally, a 1.272 cycle of the Dec. 14 low to the Jan. 10 high came due on Feb. 12. When I see a cluster of Fibonacci time cycles, I look for a reversal of whatever the move is into the time-cycle window. So, in this case, since we were trading down into the window, I was looking for a reversal to back up.

Bottom line: Both factors told us to consider the buy side of V, with the risk defined below the $153 handle. If we get a full move off the key support that continues to hold, target 1 comes in at $165.12 and target 2 comes in at $168.10. On the way up, be aware of one hurdle to clear at the $159.47-$160.27 area. If you take a trade against this zone, the maximum risk should be defined below the $153.05 area. If $153.05 is taken out, I will stop myself out. The market is a bit nervous, so play it relatively tight.

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