The stock prices of both Visa Inc. (NYSE:V) and Mastercard Inc. (NYSE:MA) last week broke out of resistance areas while financial institution Capital One Financial Corp. (NYSE: COF) lagged far behind.
The weekly chart of Capital One Financial Corp. (NYSE: COF) shows good multiyear support near $35. Much like the broader stock market this stock had a massive rally off the early 2009 lows that ran out of steam in the latter part of May. After the early August selloff in equities the stock left a long bullish tail right at the $35 support area again on the weekly chart. Technical analysis 101 dictates that the more a level gets tested the weaker it becomes. So far the $35 area has been tested three times. Should it get tested a fourth time, especially from a steep angle it could easily fail to hold support. Next real meaningful support doesn’t come in until the $20 level.
The daily chart shows the break below an intermediate support area near $47 in early August as markets sold off hard. Then after briefly testing the multiyear support zone near $35-$36 mentioned above, bounced hard and has been range bound since (gray box). The 50 day simple moving average recently crossed below the 200 day simple moving average right at the intermediate support area near $47, which should act as good resistance.
On a daily break below $40 a short position could be initiated with a first target near $36. Alternatively, should the stock first move a little higher and into the $46-$47 area one could initiate a short position there with stops on the other side of $48. Given the various headwinds at work on the charts the stock looks to be trading heavy and gravity is at work. On the other hand, a daily break above $48 on solid volume could be a game changer and lead the stock to rally into the $54-$55 area.