Swipe or Chip, the Short Term Looks Promising for American Express

 | Apr 20, 2017 | 10:02 AM EDT
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American Express (AXP) is trading higher Thursday morning after first-quarter earnings and sales numbers last night came in better than analyst expectations. Who knows if this will be a "one off" or if it signals something more durable for the credit-card company?

I will leave the fundamental discussions to others and concentrate on the charts and technical indicators. Can we swipe the charts or do we have to insert a chip card? Let's check.

In this daily bar chart of AXP, below, we can see that prices have been weakening since early March. AXP is below the 50-day moving average line and the slope of this average line is just turning down. The longer-term 200-day moving average line is still below the market and pointed up.

The On-Balance-Volume (OBV) line moved higher from a late June low but it peaked, so far, in early January. The OBV line began to weaken before prices peaked and is still pointed down. The declining OBV line tells us that sellers of AXP have been more aggressive in bailing out of longs as the volume of trading has been higher on days when AXP has closed lower.

In the bottom panel is the 12-day momentum study with this indicator making lower lows from March into April. Prices also made lower lows so we do not have a bullish divergence before today's open. A declining OBV line and sellers pressing the downside does not bode well for AXP. Don't get me wrong -- prices can rally but it just not the strongest setup for a sustained rally.

In the weekly chart of AXP, below, we can see that prices are above the rising 40-week moving average line. The weekly OBV line made lows in January and June and rose until late February. The OBV line has turned a little lower in recent weeks and gives us pause like the daily OBV line. The weekly Moving Average Convergence Divergence (MACD) oscillator has been above the zero line since October but it crosses last month to a take profits sell signal.

In this Point and Figure chart of AXP, below, we can see an interesting reversal over the past few years. There is an upside price target of around $83, which would be a slight new high for the move up. Looking back to the price action of 2014 we can see possible chart resistance from $84 to $91 or so. This resistance is a little old so it may not be that potent if AXP trades higher.

Bottom line: AXP is likely to trade higher in the near term. A close above $80 could precipitate gains to new highs. Our Point and Figure price target of $83 and overhead resistance might limit gains. Nimble traders could probe the long side of AXP risking a close below $74. Our nearby price target is $83.

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