A Couple of Ways Into Visa

 | Mar 10, 2014 | 9:25 AM EDT  | Comments
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You know that saying, "There is more than one way to skin a cat?" It's a very strange turn of phrase -- but that is what comes to mind when I consider Visa (V). There is more than one way to get involved in a relatively low-risk trade.

When you're looking at the buy side, you can either buy on a pullback to a key support level that should hold if the setup is likely to play out. Or, alternatively, you can buy on a pullback after a more important breakout, when the probabilities are slightly higher for a successful setup.

So, let's look at Visa, which I set up for a trade a few weeks back. I proceeded to ditch that trade when the stock initially stalled at a rather important hurdle, the $228.55 area, as you can see illustrated on the chart. That hurdle was a simple 100% projection of a prior $17.17 swing upward. At that point, projecting that prior swing from the Feb. 4 low had given us the $228.55 area as possible resistance, and the stock's actual high was made at $228.48, or $17.10 up from the Feb. 4 low.

In any case, I do still like the original setup in Visa, and I now see some reasons to consider the buy side again -- with the next meaningful upside target around $242.06. I still like that the price is above the 200-day and 50-day simple moving averages. I also like that Visa has held after a pullback into support at the Feb. 4 low, and that we have seen at least a short-term buy trigger since that pullback into the $217-to-$219 area. This is where I reentered Visa.

At this point, one option we have is taking a long position against the recent March 3 low at $219.59, with your maximum risk defined below the $217.91 area. I already own a call spread, with my risk defined below that support area. The second option -- which has slightly higher odds of succeeding -- would be to wait for a clear breakout above that old $228.48 high before you enter a trade.

Bottom line: I think that, if Visa does finally clear this old high, the stock is likely to head toward the original initial target around $242.06, and possibly even the second target at $250.41. I will consider myself wrong on the trade if Visa violates the $217.91-to-$219.93 support level by $1 or so.

Please refer here for general guidance on Fibonacci trade setups.

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