Mastercard Fading?

As the stocks of Discover Financial, (DFS), Capital One, (COF), American Express, (AXP), and even Visa, (V), are moving lower in consolidation zones, Mastercard, (MA), came out with news of a 10:1 split and buyback Wednesday. The stock jumped significantly touching 800 before a small pullback Thursday. Mastercard has been in a great trend higher, but does it make sense for it to jump 5% on a financial engineering trick? Apparently the masses are starting to think not. The chart today adds the technical reasons. The move Wednesday was a Japanese Candlestick known as a Shooting Star. It is a possible reversal when confirmed lower the next day.

And that is what happened Thursday, it was confirmed lower. You can also see that the Relative Strength Index (RSI) moved to being technically overbought and the price had moved above the 20 day Simple Moving Average (SMA) by as much as it has recently before a pullback to that line or below. With 22 still left to the 20 day SMA there is still time to fade this move. You could try a short in the stock with a stop at 791 or use a December 27 Expiry 780/760 Put Spread which closed near 7 late Thursday. A more aggressive play would be to sell a December 27/January 775 Put Calendar for about a 8 credit. If the stock odes pullback you can then sell the December Put and wait for the stock price to rise and the January Put to fall in price. This is not a good play unless you are willing to own the stock at 767 or to hedge your position if it does not bounce.

Disclaimer: The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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