Ready to put the squeeze on MasterCard (MA)? Here’s the trade. (August 24, 2018)
MA
I want to look at Mastercard ( NYSE: MA ); here’s why: We are in a volatility squeeze here and the stock is just coming out of here. Mastercard ( NYSE: MA ) and Visa ( NYSE: V ) look pretty similar I just thought I would cover this one here.
First of all, volume on Friday was about average. More than it has been if we just look at it this way, this is the 20-day moving average of volume; but it has not been up at this level for a while, very few days, as you go back here, has it hit this level. This is a bullish indication to me; the stock is up; closed very near the high of the day. Out of a trading range where this is not hit; it hasn’t been here that many days? Twenty trading days; so this is a new, we could say monthly high right here.
What I am saying is, that the stock closed near the high of the range on the daily chart above the last twenty days of trading. It was on some pretty good volume and it is coming out of this little volatility squeeze. So assuming the market continues to move I think this can move a lot higher. Typically, I don’t look at these high profile stocks (everybody knows Mastercard), you kind of look for volatility squeezes in stocks that aren’t so widely watched because then you can tend to get a better entry and ride them farther. But every so often you see something like this that comes along and I think Mastercard ( NYSE: MA ) can work.
So here’s what you do: You look at earnings, not an issue. Then you look at where the price is, it is a little bit below its all-time here, a couple percent. Even if it continues to run it shouldn’t run into too much supply if it is just slightly below the 200-day moving average here, so this should actually work out okay if it keeps moving.
Let’s frame some risk here. The low of the day here is 205.57. That is a pretty tight stop if you say, “Well if the stock retraces the complete move on Friday I want to get out of here.” That is a pretty tight stop because, frankly, the stock has been here before, it could be here again; if this keeps moving high that is awesome, that’s great, we’d like that. But the stock could very well pull back here, not do what you want it to do but do what I can do and stay in this trading range for a while. And then you get stopped out right here, you’re happy that you did. You took a small loss, no big deal. And then the week after next after the stock has been farting around here at 205.00 for a while, it rockets up to 215.00 and then pushes into the 220.00s and you are wondering why you put your stop so tight.
So instead of doing that, instead, just look at it this way: Say, “You know what? I have got to have this stop below the 50-day moving average.” Frankly, I should even look at this here and say, “If the stock pulls all the way back to here I will still be okay in this stock.” So you have a stop that is about 5 percent.
Now, if the stock started pulling back here I wouldn’t hang on to this stock for 5 percent, I just wouldn’t. That doesn’t mean that I wouldn’t be comfortable with a stop here; because what I am looking at in placing an initial stop is, what happens if the stock reverses and what is my worst case scenario because I am taking a small position to begin with? So I have a small dollar position in the stock and I have a looser stop which allows me to give the stock a little more room but not take a lot of dollar risk in my portfolio. If the stock starts rolling over I would have to look at it and see what is really happening.
Look at the overall market and then make a consideration as far as whether I would want to just stick with it. Or, if I see someplace else that I would rather put my money, because you can always do that. You don’t have to admit that you are wrong, you could just say, “Well, I found a better place for my money so let me exchange my Mastercard for that money and go put it in another stock.” Don’t make ego a part of your trading, make money management a part of your trading. Trust me, you will be trading better and you will trade longer, but then I repeat myself. So anyway, that is how I would trade Mastercard ( NYSE: MA ); it looks to me like this thing could move higher next week.
Free Chart