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Tickers in this Article: DFS, AXP, WRLD, CCRT, NNI
At a time when it has become increasingly difficult for consumers to obtain credit for the purchase of a home, it is interesting to note that many specialized financial services companies appear to be emerging from their bases. Rather than trying to discern the possible reasons why certain credit services companies are outperforming others, we can rely on technical analysis of their stock charts to determine which stocks are showing strength.

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While American Express Company (NYSE:AXP) is hitting new four-month lows, Discover Financial Services (NYSE:DFS) is testing highs set last October. This is a clear sign of relative strength, and DFS may be ready to emerge into a trend move higher. DFS had been building a base since last September, quietly trading between $12.50 and $16.50. DFS is starting to trade above this range, and could gain some momentum if it clears those November highs near $17.40

Source: StockCharts.com


World Acceptance Corp. (Nasdaq:WRLD) is another credit service stock beginning to emerge from its base. The mid to high $40s have historically been a tough resistance area, with reversals occurring here several times over the past four years. This may be one reason for its recent volatility, but WRLD is now showing strength by holding above recent resistance levels near $42-$44. It could be setting the stage for a test of resistance.

Source: StockCharts.com


CompuCredit Holdings Corp. (Nasdaq:CCRT) recently cleared some resistance levels, although it remains under a significant one. CCRT was consolidating tightly under the $6.50 level in April and May before falling apart and getting chopped almost in half. However, CCRT was able to form a bottoming type base and recently cleared the top of this small base near $5.40. It appears that CCRT will test the $6.50 area soon, and could be worth watching depending on the price action at this level.

Source: StockCharts.com


Nelnet (NYSE:NNI) is a credit services stock that is acting very well. NNI built a base from March through August before clearing an important resistance level just under $22. NNI has now settled into a flag pattern above its base, which often results in a continuation move higher. NNI is looking for support near $22; if it holds this level it would confirm the breakout area as support. The level to watch above is near $24.

Source: StockCharts.com


Bottom Line
With the stock market trading above recent resistance levels, it is important to focus on stocks that have solid bases beneath them. Many of the credit services stocks have built solid bases and are now emerging from these consolidations. While much will depend on whether the general markets can follow through, the bases in these charts are clearly defined and should provide a good trading opportunity with market cooperation.

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At the time of writing, Joey Fundora did not own shares in any of the companies mentioned in this article.

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