Mind the Physics on Visa

Major credit card player Visa was, undoubtedly, one of the stronger large cap stocks on Monday in what was an otherwise choppy tape.

Looking at the updated weekly chart, particularly the first one below, it appears as though Visa has an easy run for a fresh leg higher in an obvious uptrend, breaking out of a tight base (purple lines). That uptrend appeared to have started in late-2011, and it has been quite potent indeed.

However, it has been almost too strong, to the point where Visa has yet to come close to even breathing on its 50-period weekly moving average (blue line). And it has not precisely tested that reference point since August 2011. With that in mind, and observing the steep angle of ascent below, we should be viewing any meaningful giveback of Monday’s gains in Visa with a suspicious eye, as the stock could easily be vulnerable to late-atage base failure.

Late-stage base failure simply refers to each successive sideways throughout the strong, multi-year uptrend resolving higher. At some point, that phenomenon leads to a stretched rubber band prone to suddenly and surprisingly snapping back the other way.

Observing the weekly MACD on the bottom pane of the second chart, below, we can see that if the recent bearish cross fails to resolve back up, it will set up a glaring bearish divergence with these recent highs on Visa.

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