JC Parets On American Express And Tactical Approach

Eagle Bay Capital founder and market technician JC Parets recently looked into the performance and prospects of American Express Company (NYSE: AXP) in his Dow 30 report and recommended approaching the stock tactically.

Weekly Chart

As evident in the chart above, the stock experienced a failed breakout last June. This has generated some issues in the underlying trend. On top of the failed breakout, the company is putting in a bearish momentum divergence and relative strength broke a 3.5 year uptrend line.

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"These are all negatives that have suggested a sideways market, which is exactly what we've seen," Parets explained. "Shares continue to successfully test support from the lower end of this huge range since 2013. With momentum putting in bearish divergences this entire time and relative strength breaking the uptrend from the 2011 lows, I see little reason to force this long, but with an upward sloping 200 week moving average, I see no reason to be short either."

Consequently, Parets recommended a more tactical approach for American Express, as seen in the daily chart below.

Daily Chart

Looking at the short term, Parets said he’s spotted a few trading opportunities over the past months. However, "at this point based on the weight-of-the-evidence," Eagle Bay wanted to be long only above the October lows for a mean reversion.

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"Based on the weekly timeframe, this is important support that was resistance back in 2013," Parets explained. "Aggressive longs can raise stops to only being long above the downtrend line from the Jan 21 highs."

Parets concluded, "I'd take half off the table near 83 and the rest at 85."

Image Credit: Public Domain