Visa (V) nailed USAA as a partner, ousting incumbent MasterCard (MA) -- a big win from a fundamental view for the company and a much-needed push from the technical side for the bulls. The news couldn't come at a better time for bulls looking at the daily chart.
After a strong October, Visa spent a week pulling back forming a bullish flag. Friday capped off the week by a huge hammer pattern where the stock tested support and rallied all the way above resistance. Furthermore, the stock has rallied above resistance from July's highs. I'd like to see the MACD cross back over in favor of the bulls as well as the Relative Strength Index (RSI) push over 70. The stock price struggled when the RSI approached 70, so this is a valid concern. Some stock does well with a strong RSI while others tend to stagnate. Visa tends to perform better when RSI is crossing over 50, so I would maintain an approach of limiting risk and use nothing less than $75 as a stop. My preferred approach would be to use the 10-day simple moving average (SMA) on the daily chart as a stop. Over the past four months, price under the 10-day SMA has been tough sledding for longs.
The weekly view has me a bit more optimistic that this stock could see $85. After a strong run starting last October, Visa struggled a bit toward the end of summer. It's hard to toss out that dip in August, but if we ignore Aug. 24 for a moment, we see a solid cup pattern acting as consolidation for the previous move. If we consider Aug. 24, then we have a retest of support and very wide channel formation. Either way, the push over $76 triggers a breakout in the stock. If the cup does matter, then I would prefer a handle to form with the stock drifting sideways or even a bit higher.
Unfortunately, earnings are coming next week and Visa tends to be a pretty good mover around earnings. I anticipate we'll see either $72 or $85 by the time the earnings dust settles. Currently, we have a strong weekly RSI, which, contrary to the daily chart, has been beneficial for moves higher. They've tended to appear around earnings time, so this isn't a surprise to see the strength in the RSI. The trend, whether viewed by the MACD or Vortex Indicator, has not been a huge influence on the stock price, but I would still prefer to see both bullish rather than bearish.
Overall, I like the concept of a call spread, likely going with November $75-$80 call spread, although I would consider a straight call using a strike between $75 and $77 as well.