American Express Sits at Key Support as Earnings Slip

American Express tips lower after earnings. Is this a dip to buy? Let's look at key support in the stock.
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American Express  (AXP) - Get Report was down a little more than 3% on Friday as investors digested the company’s quarterly report.

Earnings of $1.30 a share missed expectations by 5 cents, while revenue of $8.75 billion sank more than 20% year over year, but slightly beat estimates by $40 million.

The price action and results are having were impact on Visa  (V) - Get Report and Mastercard  (MA) - Get Report as well, which each fell about 1% on Friday.

By and large, there were concerns about the economic recovery taking hold. While the overall stock market has done well, questions linger over the underlying economy. Management reflected similar concerns, saying it remains "cautious about the direction of the pandemic and its impacts on the economy, which is reflected in our reserve levels.”

Trading American Express

Daily chart of American Express stock.

Daily chart of American Express stock.

For a credit card company, lack of spending equals lower revenue. Without revenue growth, it’s hard for a stock to maintain upside momentum. That’s evident in the chart.

While AmEx stock has done a good job of putting in a series of higher lows, it hasn’t been able to sustain its price over the $105 to $110 area. It feels like a cautious crawl higher.

Now, shares sit at a critical juncture. Between $99.50 and $101.50 is the 50-day, 100-day and 200-day moving averages. The 50% retracement also sits in this tight range.

If American Express stock breaks this area and closes below it, it’s a decisive and intentional move to close below multiple support levels. That would not bode well for bulls and would at the very least open the door to a gap-fill down toward $96.

More than that though, it could put a retest of last month’s lows and the 38.2% retracement near $93 in play.

Below that puts the July lows in play near $90, followed by a possible dip all the way down toward the 23.6% retracement near $82.50. But let’s not get ahead of ourselves. Even if key support gives way now, there’s still plenty of other points to watch before a test into the low-$80s.

Currently, American Express stock is giving investors an inside month - where the range of the current month is contained with the range of the prior month. That changes on a move above $108.58 or a decline below $93.32.

We’ve discussed the latter, but should the stock take out last month’s high it could kickstart a breakout to the upside. At the very least, it would put the June highs in play near $115, followed by a potential test of the 78.6% retracement near $121.