Most sectors and the majority of stocks in the US stock market have had superb runs year to date, so it is to no surprise to also see the credit card companies with great performance. With both MasterCard Inc. (MA) and Discover Financial Services (DFS) rallying more than ten percent month-to-date, and by so doing reaching new year-to-date highs, the question I am pondering at present is how much longer their rally can keep going at this rate.
For a little simple perspective and to bring in the visual on what I just discussed above, on the below chart I drew the stock prices of MasterCard Inc. (MA), Discover Financial Services (DFS), American Express Company (AXP), and Visa Inc (V). In all cases we here see stocks moving from the bottom left to the upper right, simple enough.
At the same time, the credit card stocks also continue to respect their major up-trend lines. See the below chart of MasterCard Inc. (MA) for example, which for the most part since June 2012 has traded in a defined up-trending channel and with the September rally has once again reached the upper end of said channel. From this point of view, this particular stock has likely reached a resistance level for the near-term, while at the same time however remaining well positioned for further highs in coming months.
All of the credit card stocks have not only had good runs in September so far, but had up-days on anywhere from seven to nine out of the so far ten trading days in the month. While this streak can certainly continue, the odds of a breather here at least for a few sessions are increasing by the day.
Even Discover Financial Service, which just on Monday September 16th screamed to a new year-to-date high as it pushed past its summer 2013 resistance line, is now getting closer to the upper-end of its trading channel. To be clear, it’s no time to short the credit card stocks, but chasing them higher after seven to nine up-days in September so far is no great strategy either. Wait for some near-term consolidation before buying the credit card stocks again.