With the Magnificent 7 stocks floundering this week, and about 30% of the S & P 500 members breaking below their 50-day moving average in October, where can investors find emerging strength? The financial sector has been the best performing sector in October, and the chart of Visa (V) suggests this payment processor may just be getting started. Over the last eight months, Visa has been building up a “cup and handle” pattern, formed by a long rounded bottoming pattern and then a brief shallow pullback. This type of pattern will often emerge after a bullish phase, and represents a long consolidation period before a new breakout signals a renewed bull trend. The key to this particular pattern is a fairly stable resistance level, which is evident on the chart of Visa with numerous tests of the $290 level since March 2024. If and when the price finally breaks above this resistance level, this implies an influx of buying power with the potential to move the price much higher. That breakout finally occurred this week, with an earnings-fueled upside gap finally pushing V above that $290 threshold. The structure of the daily chart remains positive as long as Visa remains above the $290 price point, which now serves as potential support. Below that level, we’re watching the 50-day moving average which has lined up with recent swing lows in September and October. The weekly chart of Visa shows how this week’s breakout is just the latest sign of a bullish follow-through for the stock. Back in November 2023, we observed a similar big base breakout as V powered through its 2021 and gained an additional 18% into early 2024. The weekly RSI has remained above 40 during pullbacks in October 2023 and June 2024, demonstrating that the overall momentum picture remains bullish on the long-term time frame. You may notice that the RSI behaved quite differently in 2022, when a primary downtrend for Visa resulted in an RSI remaining below 60 on rallies. The bottom panel shows the weekly PPO, which generated a buy signal in late August 2024. Similar to the buy signal in November 2023, we see this as a sign of renewed bullish sentiment for Visa. And as long as Visa remains above moving average support, this payment processor could be headed to much further gains into early 2025. -David Keller, CMT marketmisbehavior.com DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
