Technically, MasterCard Looks Like a Short

The drop in price has resulted in a clearly defined channel that has held for more than four months. Currently, the channel shows MA trading between $130 and $150 over the coming weeks with a downward bias that should result in a new low. At current levels, MA is approaching the top of the channel and offers an excellent time to initiate a short position with a clear technical pattern.

While I do not like jumping on trades that have moved this far in a short period of time, MA is unique. The fact that the channel has persisted during multiple market rallies provides comfort. Further, a well-received earnings report two weeks ago pushed the price over $170 before resuming the downtrend. Also, this latest failed rally was the third lower high since late September (Sept. 19 -- $225; Oct. 14 -- $174; Nov. 4 -- $170). Lower highs are characteristic of falling markets and lead me to think MA may retest the Oct. 27 low of $126.35.

MA offers unique attributes in today's market. It faces economic headwinds that will restrain business growth, trades in a clearly defined downward channel and has been showing technical weakness with a series of lower highs. Therefore, I view it as an ideal short sale candidate. If the general market continues lower, we profit. If the technical pattern holds, we profit. Given the uncertainty in this market, I welcome the opportunity to trade with clear patterns and defined fundamentals.