AmEx Stock Is Trying to Rebound

American Express (NYSE: AXP) has not gotten off to a good start in 2015.
The stock has fallen from the $94 range, all the way down to a recent low of $76.53. It has bounced back over the last few weeks and is attempting to move back above its 50-day moving average. Unfortunately, it is trying to do so following a period where the slow stochastic readings approached overbought levels and have now reversed.
AXP Daily Wyatt
Despite the potential resistance from its 50-day moving average and the stochastic reversal, not all the news is bad for AmEx stock at this time. A look at the weekly chart reveals that the $76-$77 area has been an important one for the stock over the last few years. The stock saw this area act as resistance in the summer of 2013, and then it has been acting as support in recent months. It is a pretty common phenomenon for former resistance levels to act as support when there are pullbacks.
AXP Weekly Wyatt
Another item of note on the weekly chart is that the weekly stochastic readings are in oversold territory and have just performed a bullish crossover. The last time this happened was last fall, and the stock responded with a 20% gain from the bottom to the peak in December.
The sentiment toward AmEx stock is neither overly bullish nor overly bearish. The short interest ratio is low, at 1.30, but the analyst ratings are leaning toward the bearish side, with 14 “buy” ratings, 10 hold ratings and five “sell” ratings. With the sentiment picture mixed and the different signals from the daily chart and the weekly chart, what is an investor to do with American Express?
While the dip in the stock price isn’t without merit based on the company’s recent earnings performance, the selling may be overdone. AmEx is well below the industry averages for P/E ratio and earnings growth projections. It is also below the average for S&P 500 stocks in both of these categories.
Looking at the three analysis styles (technical, fundamental and sentiment), we see mixed signals from the sentiment side, bullish signs from the fundamental side and one bullish and one bearish sign from the charts. All in all though, I think AmEx stock is headed higher over the coming months.
While the short-term daily chart may indicate that the stock will drop slightly in the next week or so, I believe the support in the $76-$77 range holds and the weekly stochastic crossover plays out similarly to the one we saw last fall.
I would be a buyer of American Express with an intermediate-term holding period – probably three to four months. I would also look for a gain in the 15%-20% range out of the trade, and would set a stop-loss at the $75 mark, just in case the support gives way.

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