With total credit card debt reaching all-time highs, Jim Cramer used his Off-the-Charts segment during Tuesday's Mad Money episode to find out more about the four major credit card networks.
Cramer started by looking at the daily chart for Visa (below), which just hit an all-time high. Shares are up 28% for the year, and have helped carry the Dow Industrials to fresh highs as well.
Lang points out that this stock rarely gives you a chance to get on board at lower levels. In fact, he notes that every time Visa's pulled back to its short-term 50-day moving average, it's been a buying opportunity.
For example, about a month ago the stock sold off to the low $90s. Since then Visa has rapidly rallied up to $101 and change. Visa has been rallying on strong volume as well, passing the "lie detector" test and suggesting the move is sustainable. Lang wouldn't be surprised if the stock can climb to $120 by the end of the year, up nearly 20% from these levels.
Mastercard, the second largest credit card company, has also been performing well. TheStreet.com's Trifecta Stocks Newsletter, which Lang helps run, has a position in Mastercard, and it's been a nice long-term winner.
When you look at the Moving Average Convergence Divergence indicator (chart below), or MACD, a tool that helps technicians detect changes in a stock's trajectory before they happen, Lang points out that it's still in overbought territory. When a stock is overbought it might need to come down a little or trade sideways for a time in order to digest its recent gains. However, the MACD is still flashing a buy signal here, which makes Lang think Mastercard could have more room to run.
In addition, the Chaikin Money Flow Oscillator, which measures the level of buying and selling pressure in a stock is still in positive territory, suggesting the big hedge fund and mutual fund buyers remain interested. Lang would like to see Mastercard pull back to its 50-day moving average, which has been a floor of support for the stock, but given the company's large, aggressive buyback, you might be waiting a long time for that kind of decline.
In the case of American Express, which has been trying to turn around after years of disappointing investors, the stock has been on a fabulous tear since the beginning of the summer. Lang points out that the Chaikin Money Flow oscillator remains strong here and the volume just keeps creeping higher.
Lang also sees a cup-and-handle pattern, one of the most reliably bullish chart formations around. Now that American Express has broken out above $85 here, Lang is betting it could reach $100 before too long.
Discover Financial Services, with a stock that's down 13% year-to-date, is the only laggard in the group. Lang thinks that Discover is likely to remain an underperformer. Since the stock's big breakdown in March, it's made a series of lower lows and lower highs -- never a good sign. The Chaikin Money Flow is in negative territory, meaning the big institutional players still want out. Meanwhile, Discover is below its 200-day moving average, the classic sign of a not-so-hot chart.
Even though it's looking like Discover may have bottomed two months ago, that doesn't necessarily mean it can make a comeback. Lang points out that the stock continues to trade below key levels. For example, there are two gaps from late April that still need to be filled in, at $64 and $66, and Lang thinks those levels could represent powerful ceilings of resistance.
Here's the bottom line: the charts, as interpreted by Bob Lang, suggest that Visa, MasterCard and American Express will continue to be the big winners from the switch from paper to plastic, while Discover continues to lag.
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