Is American Express (AXP) now a good buy, or a falling knife? (January 25, 2016)
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I want to look at American Express ( NYSE:AXP ) here. I’ll call this Catch a Falling Knife and Put it in Your Pocket. I got a request on our website for my take on this. “Is this a bottom? Is the low in?” And I’m saying potentially. And the reason I’m saying that is for two days in a row, this low was 54.14, this low today was 54.14 as well. So for two days in a row the low has held. Now, you are ABSOLUTELY catching a falling knife here, this thing just looks ugly. But look how MATURE the downtrend is. This is not my kind of trade where to, “Oh, I love to buy stuff right at the bottom and sell it right at the top.” That is not what I do. I like to wait for other people to jump out of the foxhole first. And when I see them keep running instead of get hit, then I’ll go out of the foxhole.
But with that said, this is a low risk trade, because you can buy this stock, keep a stop just a little bit below $54.00. And if your stop gets hit, then well, low and behold the low is not in and you just get out of the stock. DON’T buy this stock, fail to put a stop in, and then just ride this thing down. You don’t want to do that. We’ve all seen Wile E. Coyote ride the rocket, the ACME rocket in Roadrunner, that never worked out too well for Wile E. Coyote. So $54.00 is your support, don’t even hold the stock to 50.00 if it continues to fall. You put your stop in at like 53.95, and if the stock trades up, great, you caught it at the bottom; then look to be selling. But if the stock falls below your stop, you want out.
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