From the desk of Tom Bruni @BruniCharting
Mobile Payment stocks have been a key part of our focus on the Technology theme taking place across various sectors of the market.
Since the summer the space has cooled off a bit but is back at levels where it would make sense for the trend to reaccelerate to the upside.
Here's the Mobile Payments ETF vs S&P 500 ratio (IPAY/SPY) pulling back to trendline support. This looks like a normal pullback within a long-term uptrend, however, our concern is that momentum got oversold for the first time since mid-2016.
The strongest uptrends do not get oversold, but unfortunately, this one has so we need to watch if prices bounce from this level and resume their uptrend (preferably getting overbought once again) or if they roll over through support and make fresh lows.
Click on chart to enlarge view.
While we think the former situation is more likely, one way to mitigate our risk of being wrong about this trend of outperformance continuing is by expressing this thesis through the strongest stocks in the space.
In this case, we're looking at Visa, which has been consolidating below resistance at 185 since July. Momentum has maintained its bullish regime and prices are now bumping up against all-time highs once again.
There's been a lot of talk about the growth/value trend being over, but we're in the camp that Technology is still the leader and we want to stick with this trend across sectors of the market.
If we're wrong and IPAY/SPY breaks through support to new lows then we're likely in an environment where Visa and other stocks are NOT breaking out...meaning our trade likely didn't trigger and we move on unscathed. If, however, IPAY/SPY digs in here and begins moving higher then that's likely in an environment where Tech, the broader market, and leading stocks like Visa are performing well.
We think the latter is the higher-probability outcome and therefore want to be buying Visa on a daily close above 185, with a 232 long-term target.
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