Dow component American Express Company (AXP) has traded poorly since posting an all-time high in July, dropping more than 10%, but shareholders can likely look forward to better times in the fourth quarter. The financial giant is now sitting comfortably above April breakout support while depressed weekly indicators slowly turn the corner, raising the odds for a strong recovery wave that may reach new highs prior to year end.
The stock got dumped aggressively during 2018's fourth quarter swoon, carving a vertical 25-point decline that posted an 11-month low into year end. It recovered at the same trajectory in the first quarter of 2019 and completed a cup and handle pattern, followed by a healthy breakout that added another 15 points into July. The stock has been testing new support for the past five weeks and may soon reward dip buyers.
AXP Long-Term Chart (1991 – 2019)
The stock bottomed out at a seven-year low near $4.50 in 1991 and turned sharply higher, entering a powerful trend advance that posted impressive gains into the 2000 high at $55.15. That peak marked the highest high for the next six years, giving way to a bear market decline that found support in the low $20s after the Sept. 11 attacks in 2001. Price action built a base around that level into 2003 and bounced, posting decent upside during the mid-decade bull market.
American Express shares completed a round trip into the 2000 high in 2006 and broke out, topping out in the mid-$60s in 2007, ahead of a steep downturn that accelerated into a near panic during the 2008 economic collapse. A 13-year low on top of the 1987 high finally ended the rout in March 2009, giving way to a V-shaped recovery wave that reached the 2007 peak in 2013. The subsequent breakout booked impressive upside into the upper $90s, where the stock topped out once again in 2014.
A steep decline to a six-year low in 2016 ended the subsequent correction, yielding a steady uptick that finally mounted the prior high in November 2017. Price action since that time has been volatile but constructive, with steep downdrafts attracting committed buying interest. New support is now located between $114 and $115, where the April 2019 breakout and 200-day exponential moving average (EMA) have narrowly aligned.
AXP Short-Term Chart (2014 – 2019)
The monthly stochastics oscillator crossed into a sell cycle in July 2019, and that bearish signal remains active as we end the third quarter. However, the weekly indicator is nearing the oversold zone while the stock trades a few points above new support. This potent combination might generate a final descent into the upper red line, tagging the 50-week EMA, where a low-risk buying opportunity will reach the optimum price.
A Fibonacci grid stretched across the 2018 into 2019 rally wave places the .382 retracement level at narrowly aligned moving average and breakout support, adding reliability to a prediction that $114 to $115 will offer an excellent trade entry for positions held through the fourth quarter. Stops on active positions can be placed under that level because continued downside will fail the breakout and set off aggressive sell signals, exposing a trip to the 200-week EMA in the $90s.
The on-balance volume (OBV) accumulation-distribution indicator is trading at the same level as the 2010 and 2014 highs, but an aggressive stock buyback program this decade is skewing those numbers. OBV does show minor distribution since July, pointing to a garden variety pullback rather than a full-blown decline. This too bodes well for the future of American Express shares, which may feature another rally to all-time highs.
The Bottom Line
American Express stock is near major support following a two-month correction and could bounce soon, completing a round trip to the mid-summer high.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.