Back in June of this year I wrote a piece that included an in-depth video analysis dissecting the price action (at that time) in American Express (NYSE: AXP). I also gave my thoughts on where I believed American Express stock was heading and why.
Here we are, roughly four months later, so I thought I would do an updated analysis of Amex to discuss what’s transpired over this time and how this fits (or not) into my original analysis.
I highly recommend you watch the June video before reading on, but for those with incredibly short attention spans, I will briefly summarize.
I was bearish on American Express stock back in June as I believed the price was setting up for a much larger breakdown.
American Express stock had just undergone a strong short-term decline on the heels of news by Synchrony Financial (NYSE: SYF) that it expected higher write-offs of bad debt. This news caused a two-day drop of just about 10%. That sharp move lower, however, only led to higher prices over the next several weeks.
Chasing Headlines Doesn’t Work
To be clear, I am never an advocate of trading headlines, nor chasing a stock up or down.
I am, however, an advocate of patience and sound risk management as good trades develop, they don’t just happen.
What this means is that if a stock is going to move either higher or lower over time, it will develop accordingly on the charts over time and give a sound entry so you can quantify the risk you are taking.
Chasing headlines is for those who don’t know any better. That strategy is typically emotionally charged – be it greedy or fear-based – and usually doesn’t work very well over the long run.
While the last four months have proven to be more sideways in nature for this stock than down, this only adds more fuel to the fire of my original outlook.
I continue to maintain that very bearish stance today. This time however, I’m starting to see this stock actually beginning to unravel. It is a strong signal that we may be on the precipice of something potentially much more significant.
Let’s take a good look at American Express stock again so you can see what I mean about letting a trade develop and moreover, how this Wall Street darling continues to underperform and looks set for much lower prices.