We last examined Visa Inc. (V) in the middle of October, writing, "with prices extended on the upside we could experience a pullback in the short-run to around $105-$104. This dip, should it occur, may be a buying opportunity risking below $102 while looking for gains to the $117-$120 area." Looking back over the last three months one can see (first chart below) that V made a shallow dip in October and a deeper dip at the end of November. The stock never approached the $102 stop level and now that it has moved above our $117-$120 price target some new parameters are in order.
In this daily bar chart of V, below, we can see that the shares are positioned above the rising 50-day simple moving average line and above the rising 200-day line. Currently, V is at a particular wide point with respect to the slower-to-react 200-day line. When prices get too far away from the 200-day line you sometimes see a pullback toward the that line.
While the daily volume histogram shows an uneven pattern of activity, the On-Balance-Volume (OBV) line has been rising steadily the past 12 months and tells us that buyers of V have been more aggressive. The strength in the OBV line tends to confirm the uptrend and gives buyers confidence. The trend-following Moving Average Convergence Divergence (MACD) oscillator is in a very bullish trend above the zero line.
In this weekly bar chart of V, below, we can see that the slope of the 40-week moving average line has done a great job in defining the trend and the direction for investors and traders. V also looks a bit extended compared to the 40-week line. The weekly OBV line has been rising nicely since December 2016 and supports the bullish story on this time frame. The weekly MACD oscillator just turned up again to a fresh go long signal.
Jim Cramer discusses Visa as well as the 3 best sectors that have lifted the stock market here.
In this Point and Figure chart of V, below, we can see a very important breakout at $83.91 and other smaller breakouts over the past year. A $118.91 price target is shown and obviously passed. Passing a price target or overshooting a target is not unusual in a bull market. This is not a reason to sell but it can make the odds of a correction more likely. Corrections can be a pullback or dip or they can be sideways affairs. Sometimes you can observe an alternation in the kinds of corrections a stock makes -- sideways and shallow corrections can alternate with deeper corrections.
Bottom line: The price of V is extended when compared to the 200-day moving average and the 40-week moving average. You could call it "overbought" if you like that phrase better. Early in a rally being overbought is a sign that a stock is strong and likely to carry still higher. Later in an advance overbought means new buyers need to be careful and think carefully about buying "at the market." However things play out, I would suggest raising sell stop protection to just below the last low or a close below $106.
