American Express (AXP) reported a second-quarter earnings beat but also substantially boosted its provision for credit losses in anticipation of more defaults ahead. American Express stock is trading lower in the pre-market and the question is whether this is an opportunity to buy a dip or the start of a turn lower in AXP shares. Let's go to the charts and indicators to see what information we can glean.
In this daily bar chart of AXP, below, I can see that prices are showing a mixed picture. Prices have advanced from an October low to a high in February, but then the trend turns sideways. Prices rally again from a higher low in May but have been unable to overcome the February highs. AXP trades above the rising 50-day moving average line and above the rising 200-day line. The trading volume looks a little more active since late January, but the On-Balance-Volume (OBV) line has been weak since February. The Moving Average Convergence Divergence (MACD) oscillator is above the zero line but has been correcting since the middle of June.
In this weekly Japanese candlestick chart of AXP, below, I can see a mostly positive picture. Prices are trading above the rising 40-week moving average line. I do not see disturbing upper shadows telling me that traders are rejecting the highs. The trading volume has been shrinking the past three months or so and that is a negative. The OBV line, however, shows a rising pattern from last June. The MACD oscillator is above the zero line and tells me the trend has been positive.
In this daily Point and Figure chart of AXP, below, I can see the software is showing a potential upside price target in the $227 area.
In this second Point and Figure chart of AXP, below, I used weekly price data. Here a price target of $233 is projected.
Bottom line strategy: The price of AXP could dip toward the $170 area and not disturb the short-term pattern of higher lows. Aggressive traders could buy this dip if they don't mind risking to $164. Other traders should wait for strength above $180 before buying.
