Eyeing MasterCard

 | Jun 07, 2013 | 7:30 AM EDT
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As we finally start to see a nice healthy correction in the stock indices, the question that's always asked is whether this is a buying opportunity. In some individual stocks, I believe it is.

With that in mind, MasterCard (MA) is one of the names I'm stalking at the moment. It is a little bit of a crapshoot, given Friday morning's unemployment figure, but I see two standout price support clusters on the daily chart. The stock is already testing the first zone at $553.78 to $557.35 area, and the second zone comes in at $549.75 to $550.30.

MasterCard (MA) -- Daily
Source: Dynamic Trader

If the price continues to hold above one of these areas, I would like to see a buy trigger fire off on the 30-minute chart -- and, at that point, my risk can be defined below the low made prior to that trigger. Also, for some traders, an options strategy might be more appropriate on this one.

If the most recent low remains intact at $557.10, I can tell you now that the target will come in around $597.68. If, instead, a new low is made into one of the zones, the target will be recalculated by running the 1.272 Fibonacci extension of the swing between May 21 high and the new low.

Besides the Fibonacci work I've done on these charts, I also like the fact that MasterCard is clearly above the 200-day and 50-day simple moving averages. Also, the weekly chart is still bullish. Although this does not mean that this trade setup will work for sure, it's nice having the averages and the patterns on your side!

Let's see if this one fires off a trigger, as this will tell us that it is worth placing a bet on the buy side. I will consider myself wrong in the trade if the stock breaks the support illustrated on the chart.

For more information on trade triggers, please refer here.  

Columnist Conversations

I reached out last week to my close friend Ken Shreve, who is a prominent writer for the IBD.  I asked Ke...
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