Paypal Holdings Inc, Navient Corp Shares Signaling a Bounce

History suggests financial stocks PYPL and NAVI could spring off of long-term trendlines

Feb 3, 2017 at 11:54 AM
facebook twitter linkedin

Financial stocks are in the crosshairs today, amid rumblings that President Donald Trump could roll back regulations within the industry -- including Dodd-Frank. Shares of Paypal Holdings Inc (NASDAQ:PYPL) and Navient Corp (NASDAQ:NAVI) are benefiting, too, both solidly higher at last check. Plus, based on a closer look at the stocks' respective charts, the duo could be on the verge of a near-term breakout.

Currently, PYPL is up 0.7% at $39.86. What's more, the financial shares are flirting with their 200-day moving average, which has served as a bullish signal in the past. In the last three years, the stock has touched this trendline four times, and gained ground in the ensuing month 100% of the time. On average, PYPL's post-signal 21-day return is a gaudy 4.8%.

paypal stock chart with 200 day moving average

It's a similar story for NAVI. The shares recently touched their 160-day moving average, and following the two prior occurrences, they soared an average of almost 21% in the ensuing 21 sessions. It looks like the bounce is already beginning, as the stock is currently up 1.9% at $15.39.

Two other factors could bolster both PYPL and NAVI shares. For one, each stock's 14-day Relative Strength Index (RSI) settled at 34 last night -- just a chip-shot from "oversold" territory, suggesting today's gains may have been in the cards. For another, PYPL and NAVI have elevated short-interest ratios (SIR) of 6.20 and 6.60, respectively. In other words, there's plenty of pent-up buying power on the financial stocks, which could lead to a powerful short-squeeze rally.

Technically speaking, Paypal Holdings Inc (NASDAQ:PYPL) and Navient Corp (NASDAQ:NAVI) have cooled off lately, as evidenced by their low RSI readings and trendline pullbacks. Longer term, NAVI has been the stronger of the two, soaring 61.3% year-over-year, while PYPL has tacked on a more modest 7.2%.

Don't miss Schaeffer's free weekly stock market forecast. Sign up now for Monday Morning Outlook.

Special Offers from Schaeffer's Trading Partners