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Unusual Pattern of the Day: American Express (AXP)

Unusual Pattern of the Day: American Express (AXP)

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  • Credit card provider American Express (AXP) just saw a long-term bullish signal trigger on shares. The trigger occurred right as shares dropped following lackluster earnings. The move is a sign that shares are likely to head higher, even after a sizeable drop on Friday.

    The pattern is a golden cross. That’s where the company’s 50-day moving average rallies over the 200-day moving average. It’s a sign that shares, which have been trending up, are likely to do so.

    Shares have been trading down a bit ahead of earnings, and the chart clearly shows a gradual uptrend with some waves higher and lower. That can provide some very short-term swing trades.

    Action to take: Despite the selloff, the company’s earnings came in stronger than expected, and consumer spending is on the rise. That’s going to be good for AmEx’s bottom line over time. The pullback from $107 to $101 leaves shares a bit neutral.

    Traders should buy the March 2021 $110 calls. Shares only need to head 10 percent higher from current levels for the option to move in-the-money. In the next few days, however, the option will likely increase as the gradual uptrend takes over from the company’s earnings report.

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  • The option last carried a bid/ask spread around $5.15. It’s likely good for high double-digit gains on a bounce in the coming weeks.