Visa and Mastercard: Sell the Excitement, Buy the Pullback

At around 3 p.m. on June 29, an hour before the close of equity trading, the Fed announced a change to the swipe fees associated with debit card transactions. The Fed decided to reduce the rate for these swipe fees from $044 to $0.21 cents. This announcement triggered an extremely strong surge in the price of the credit card companies, namely Visa (V) and Mastercard (MA)

No doubt some of you may scratch your head and wonder why a decrease in revenues is cause for excitement. Lets get in the Delorean and go back to December of 2010. At a meeting back then, the Fed had discussed decreasing the swipe fee to as low as $0.12 per debit card transaction. That piece of news caused a precipitous price decline.

In the months since December, Visa and Mastercard have regained their prior upward trend and closed the gap caused by that news.





Two of the fundamental rules of trading are

• Buy low and sell high, and
• Sell on excitement.

I can assure you that many of my peers and several portfolio managers did just that. They saw Visa and Mastercard reach prices that they could only expect to attain under the very best bull market conditions. Especially Mastercard, which yesterday touched long-term resistance levels last made when the stock made all-time highs.



As you can see in the above chart, yesterday’s price action brought Mastercard close to all-time highs.

The smart money started exiting these stocks after they had crossed the 10% threshold and is now waiting for a pullback to possibly reenter the trade.

Smartstops has the short-term stop on Visa at $72.66 and the long-term stop at $70.43. The reentry signal was triggered yesterday at $81.11



Smartstops has the short-term stop on MasterCard at $258.49 and the long- term stop at $258.34. The reentry signal was triggered yesterday at $288.57.



Editor's Note: For more, visit SmartStops.net.

Silver Is Now a Value Buy

Value investors, such as Warren Buffet, William O’Neil and Jordan Kimmel are all big proponents of the idea of buying low and selling high. All these extremely experienced investors also look at historical patterns and are always on the hunt for bargains.

Or as traders refer to it, “buying into a pullback.”

Since its ballistic drive up in late April to create new historic highs, silver has plummeted down and the market saw the kind of volatility many traders thought gone in the post-financial crisis era. But rather than continue its free fall to price levels that this writer thought were more in keeping with its historic norms, silver defied expectations and has consolidated in a $5 range over the past seven weeks.


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Some peers of mine who are absolutely first-rate technicians believe silver is maturing into a Bear Flag and may indeed seek out historically normal price levels in keeping with the 1:60 ratio of Gold and Silver. Time may prove their premise correct.

As a trader who keeps his eyes on the price action of the players in a sector, I am of the belief that this range has allowed a few savvy investors to accumulate silver at price point they are comfortable at. If you look at the charts of the silver exchange traded fund, iShares Silver Trust (SLV) you will see that it has held above the 210-period moving averages. The first check in favor of a bullish bias.


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With the uncertainty in the markets over the future of Greece and the effect events there may have on other similarly indebted nations, do not be surprised if investors in Europe rally to precious metals before people in US markets do.

Another check in the favor of the bullish scenario is that from a historical perspective gold and silver prices rise in the latter half of the year. This price jump is spurned on by demand from India as my kin buy mountains of the metals to celebrate religious festivals and the peak of the marriage season.

SLV will languish down here only a while longer and may then seek out the $40 price point. Don't be too surprised if silver is back at the highs by year's end. Smartstops has the reentry price for SLV at $37.72 and the short term and long term stops at $32.33 and $31.42.


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Editor's Note: For more, visit SmartStops.net.

Why Netflix Still Has Room on the Upside

Netflix (NFLX), the pioneer of the DVD by mail business and slayer of once mighty Blockbuster Video, has been on an absolute tear the past two years. Streaking up from the $40 value it consolidated under for nearly three years, the stock has since risen almost 700% and is up over 30% year to date.

As the company transitions to providing more streaming video, it has seen growth skyrocket, no doubt aided by the vast array of partner products their offerings can be streamed through. Netflix has been reallocating money saved from the expense of free mailing to building a much larger catalog of movies and television shows for its very supportive user base.

But growth of this magnitude has painted a bull’s-eye on Netflix’s back. With the transition to the digital landscape, it has opened itself to the vulnerability of competing against some very well funded competition -- Amazon (AMZN), Google (GOOG), and Apple (AAPL) being among the most notable.

The stock seemed to peak just over the $250 level and struggled for several months to make new highs, even forming a short-term head and shoulders pattern. Amid the pattern development came news of the departure of the CFO, and the start of Amazon’s new free streaming service for its premier members. Then came a potential knife to the jugular, Google’s deal to stream content from Sony Pictures (SNE), Warner Bros., NBC Universal(CMCSA), Lions Gate Films (LGF), Starz, The Weinstein Co., Magnolia Pictures, and many other independent studios. Fortunately for those who were bullish, it failed to break the neckline support at the $224 price level.

Recently came the news that Netflix will be working with Facebook, instead of Facebook taking on Netflix. An analyst at Pacific Crest Securities, Andy Hargreaves said:

"Facebook integration could boost global subscriber growth. We believe Netflix is working with Facebook to tightly integrate Netflix into Facebook's platform. This could help increase time spent in Facebook and drive incremental Netflix subscribers domestically and in new international markets. We believe that, on top of its existing momentum, the company is working with Facebook to launch deeper integration of Netflix into the Facebook platform. The first stages of these efforts are likely to launch within the next few months, and we believe they could drive incremental subscriber growth domestically while helping to accelerate Netflix's international expansion."

In a recent piece by the NY Times, Mr. Zuckerberg said: “Music, TV, news, books — those types of things I think people just naturally do with their friends. I hope we can play a part in enabling those new companies to get built, and companies that are out there producing this great content to become more social.” In the same article, Mr. Zuckerberg mentioned Netflix as one of the companies that had been in talks with Facebook.

Since that article came out, Netflix has popped above the aforementioned $254 resistance level, is now leaving that level far behind, and may seek out the $280 price target set by Oppenheimer in late April.

Equities that take the elevator up, often take it down. But you don’t have to give back your profits. Stay Protected. Smartstops has the short-term stop at $246.32 and the long-term stop at $228.00.

Editor's Note: For more, visit SmartStops.net.