Filed Under:
Tickers in this Article: FCFS, NNI, DLLR, ECPG
When it comes to credit service companies, most consumers first thoughts are on the credit card companies like American Express Company (NYSE:AXP) or Capital One Financial. However, there are many players in this space, and recently their stocks have been performing very well. It's interesting that in a time where many consumers are frustrated with the difficulties in obtaining credit, many companies with specialized credit services have been able to do well based on the performance of their stock prices. IN PICTURES: 8 Ways To Survive A Market Downturn

For instance, First Cash Financial Services (Nasdaq:FCFS) primarily operates pawn stores that lend money on the collateral of pledged personal property in the United States and Mexico. This is an area that may be expected to do well as consumers turn to alternative means for securing cash flow. In looking at the stock, FCFS is currently trading near its all time highs and is just emerging from a base it has been building for a few months. A continuation above this base should lead to a test of that all-time high near $27 and possibly more. One area to watch would be this area of resistance it is trying to clear just above $23 per share. If it can confirm this area as a new floor, it may lead to new all-time highs. (For more, see Channeling: Charting A Path To Success.)

Source: StockCharts.com


Nelnet (NYSE:NNI) is a transaction processing and finance company that provides education-related products and services to students, families, schools and financial institutions in the United States. Education stocks have been on fire lately, so maybe it makes sense that NNI would follow suit. Looking at the chart for NNI, it cleared a base in March after a false breakdown. It had been forming a base-on-base pattern (where a consolidation occurs just above a prior consolidation) until attempting to break out a few days ago. NNI has been holding above the breakout area and the first level to watch would be the $20 area. A move below this area will signal a false breakout and suggest that further consolidation is necessary.

Source: StockCharts.com


Dollar Financial (NasdaqGS:DLLR) provides retail financial services to unbanked and under-banked consumers. This appears to be another alternative credit company; not surprisingly, it is within shooting distance of its all-time highs in the low $30s. The near-term chart structure for DLLR is healthy, with DLLR just beginning to emerge from a healthy consolidation. DLLR had been basing sideways from December through April after a sharp rally in Autumn of 2009. DLLR had been basing tightly just under resistance for the past month and was able to clear it a few days ago. Volume was higher on the breakout and DLLR is testing the area as support on this pullback. While the breakout level should be watched, more conservative traders would likely keep an eye on the $24 level that has been supporting this stock over the past two months. (For more, see The Anatomy Of Trading Breakouts.)

Source: StockCharts.com


Encore Capital Group (NasdaqGS:ECPG) purchases and manages charged off consumer receivable portfolios. This stock is still below recent highs, but could be on the verge of a breakout attempt. ECPG has had a volatile few months of trading, with several sharp rally attempts followed by lower volume pullbacks. ECPG has been settling down as volatility decreases and had been respecting a trendline as resistance on its most recent rally attempts. ECPG was able to clear this level earlier this week, and if it can clear its February highs, then it should lead to a test of its December highs soon thereafter. This is a volatile stock, so traders should be cautious. One level to watch is the recent lows in March and April. A break below this level would signal a breakout failure and a probable test of support near $15.

Source: StockCharts.com


Bottom Line
The stock market is full of companies that meet specific needs and operate in their own niche markets. Often, these groups will operate with a certain amount of non correlation to the markets. This would be one sector that could possibly hold up through general market weakness, or continue to perform well if the environment remains bullish. In either case, their individual charts are pointing to higher prices and they could be providing a good trading opportunity. (For related reading, check out The Best Way To Borrow.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

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

comments powered by Disqus
Trading Center