A breakout in shares of Visa (V - Get Report) is sparking a buy signal for the world's incumbent payment network. Visa broke its uptrend back in mid-February, sending a red flag for traders who've been enjoying the 22% rally shares have made in the last six months. But instead of breaking down, Visa consolidated sideways in a pattern called a rectangle.
A rectangle pattern is basically a trend channel (like the one in Sanofi) turned horizontally; it's formed by a horizontal resistance level above shares and a horizontal support level below them. Rectangles are common after large market moves because they give investors a chance to catch their breath before deciding whether to continue building their position or take gains. Yesterday's breakout means that Visa shareholders have opted to do the latter.The push above resistance in Visa is a buy signal. If you're looking to put in a position in V, today's a good day to be a buyer. The 50-day moving average has been a stellar proxy for support for the last six months, so unless you're buying Visa here for fundamental reasons, the 50-day is the ideal place to put a protective stop.
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