Dow component American Express Company (AXP) broke out to an all-time high in April, just a few days after beating first quarter earnings per share (EPS) estimates by $0.04 and reaffirming 2019 guidance. A series of analyst upgrades has followed in May and June, adding to relative strength, which has also benefited from speculation the financial giant will eventually merge with The Goldman Sachs Group, Inc. (GS).
American Express stock has now lifted into the sixth slot in Dow component performance, just two clicks below rival Visa Inc. (V). Amex underperformed Visa and Mastercard Incorporated (MA) for years but has played an admirable game of catch-up since 2017 and is now matching the upside of its rivals, point for point. This bodes well for healthy returns in the new decade, which should also benefit from the company's broader product catalog and more affluent customer base.
AXP Long-Term Chart (1990 – 2019)
The stock completed a double bottom reversal at a split-adjusted $4.63 at the start of 1993 and turned higher in an uptrend that accelerated to higher ground after mounting 1987 resistance in 1995. A quick dip during the 1998 Asian Contagion got bought aggressively, yielding a final rally impulse into the October 2000 high at $55.15, followed by a steady decline that found support in low $20s after the Sept. 11 attacks in 2001.
Higher lows in 2002 and 2003 set the stage for prolific gains that completed a 100% retracement into the 2000 high in 2006. The stock broke out seven months later, lifted into the mid-$60s in 2007, and rolled over in a steep decline that broke 2001 and 2002 support levels in November 2008. Selling pressure finally ended at a 13-year low in the single digits in March 2009, giving way to a recovery wave that reached 2007 resistance in 2013.
The subsequent uptrend stalled in the mid-$90s in 2014, while the decline into 2016 ended at 200-month exponential moving average (EMA) support near $50. That marked a historic buying opportunity, followed by a rapid recovery that mounted 2014 resistance in December 2017. The stock tested that level into the first quarter of 2019 and took off in a strong buying impulse that has posted a long series of highs into Thursday's all-time high above $126.
The monthly stochastic oscillator crossed into a buy cycle above the panel's midpoint in March 2019, indicating unusual relative strength, and reached the overbought zone in May. Even so, price action isn't too overextended, predicting that the stock can add to gains through the summer months. Meanwhile, the 50-month EMA is rising toward $100, raising the odds that the stock will test that psychological level once again and offer a low-risk buying opportunity.
AXP Short-Term Chart (2016 – 2019)
Price action has carved a trendline of higher lows since 2016, while 2018's highs completed a rising channel pattern, which was broken to the upside in June 2019. The stock bounced at new support a few days later and could rally above the $130s in the coming weeks. This trendline will mark the first support level during an intermediate downturn, aligning slowly with the 50-day EMA near $118, with a breakdown opening the door to the lower black trendline and psychological $100 level.
The on-balance volume (OBV) accumulation-distribution indicator topped out in 2010 and stalled at that level in 2014 and 2015. The subsequent distribution wave ended at a seven-year low in 2016, yielding healthy buying interest that reached 2010 resistance once again in August 2018. The indicator has been grinding sideways since that time and could provide reliable directional clues when it finally turns higher or lower.
The Bottom Line
American Express shares are trending strongly in 2019, playing catch-up with credit card rivals through a series of all-time highs.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.