The stock began to send exhaustion signals towards the end of last month as shares pushed into fresh 2015 highs ground. Since then, further upside has been limited while upside trade has eased. This topping action has grown a bit more ominous this week and may soon give way to a full-blown pullback. Patient investors will find lower entry opportunities once this process is complete.
After consolidating in September, Visa began the second leg of its post-Aug. 24 rally. By Oct. 30, the stock had gained over 15% and was beginning to put a little distance on its initial 2015 peak of $76.90. The area of this high, which was set back in July, was setting up well as a key support zone as October came to a close.
That changed dramatically with Visa's volatile session on Nov. 2. Shares opened the new month with a huge earnings-inspired downside gap as it headed for a 3% loss on its heaviest negative trade since April of 2014. The stock rebounded quickly the next day, but the steep selloff on earnings, which easily took out support near the July high, put the bulls on edge.
Volume has remained below average since the Nov. 3 bounce back while Visa has remained in a tight range. It now appears more likely that this post-earnings congestion will end with a downside move. Shares are still stable, but a close back below the July high could begin to shake quite a few bulls out.
If this transpires in the near term, investors should turn their focus to the stock's 50-day moving average near $74.30. A dip down to this level would also retest the stock's November low set back on Nov. 2. A short-term base here would set the stock up for a renewed bull run while offering investors a low risk buying opportunity.