Mastercard (MA) has been going up and up and up. Back in May I reviewed the charts and indicators for MA, noting that " It is not that often I can find an indicator set-up like a triple divergence of the slow stochastic. Sounds like technical analysis double talk, but I would be remiss if I did not point it out. Is MA going to turn south in a hurry? Probably not, but I would raise sell stop protection to $173."
Looking back over the past three months or so of trading we can see that prices have continued to climb despite the indicators. This reinforces an important lesson - the trend is more important than pretty much anything else. The uptrend has continued despite overbought readings.
Let's see what the updated charts and indicators look like now.
(For more on MA, see Jim Cramer: Valuations Now Have No Relation to Common Sense.)
In this daily bar chart of MA, below, we can see that prices have added about $20 per share since late May and are still above the rising 50-day simple moving average line as well as the bullish/rising 200-day moving average line.
The level of trading volume looks like it has slowed from early May to late July to now but the daily On-Balance-Volume (OBV) line continues to rise to new highs which tells us that buyers of MA have been more aggressive with heavier volume being transacted on days when MA has closed higher. This indicator confirms the price strength.
In the lower panel is the 12-day price momentum study which shows lower peaks in momentum from May to July to now. This slower pace for the advance is a bearish divergence when compared to the higher price highs over the same time frame. This can indicate a potential reversal in price but this is not a precise tool.
In this weekly bar chart of MA, below, we can see the base pattern in the $80-$100 area back in late 2015 and early 2016. Prices broke out above the 40-week moving average line and they are still above that long-term indicator of trend.
The weekly OBV line has been strong from July 2016 and recently made a new high for the move up - bullish.
In the lower panel of the chart is the 12-week price momentum indicator which shows a slowing from March of this year. This is a bearish divergence when compared to the rising price pattern and suggests we should be growing more cautious.
In this Point and Figure chart of MA, below, we can see pretty much the same amount of price data as the weekly chart above.
Prices have met and exceeded a long-term price target of $190, but prices are still pointed up. A decline to $196 would weaken this picture.
Bottom line strategy: The price of MA could continue to rise but diminishing trading volume and weakening price momentum suggests we need to raise sell stop protection to $192 from $173.