Dow Stock Sending Up Short-Term Bullish Signals

Visa stock tends to outperform after lengthy Dow losing streaks

Jun 21, 2018 at 1:48 PM
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The shares of Visa Inc (NYSE:V) are lower today, likely due to broad-market headwinds. However, the credit card concern notched a new record high just yesterday -- and the stock just flashed a bullish options signal, to boot. What's more, Visa stock has historically been the best blue chip to own after a lengthy Dow losing streak.

V stock has more than doubled since its February 2016 lows. The shares have added roughly 18% in 2018 so far, with pullbacks contained by their 120-day moving average, and after a period of consolidation beneath the $125-$126 level, broke north of this region in early May. As alluded to earlier, Visa stock has been exploring all-time highs recently, topping out at $136.69 yesterday. At last check, the equity was down 0.7% to trade at $134.51.

visa stock chart june 21

Despite the blue chip's upward momentum, near-term options remain attractively priced. Visa sports a Schaeffer's Volatility Index (SVI) of 16.8% -- in the bottom 20% of its annual range, suggesting short-term options are pricing in relatively low volatility expectations during the past year.

Since 2008, there have been just four other times at which V stock was flirting with new highs while simultaneously sporting an SVI in the bottom 20% of its 12-month range. A month after those instances, Visa shares were higher 100% of the time, averaging a gain of 3.81%, per data from Schaeffer's Senior Quantitative Analyst Rocky White.

Even more intriguing, perhaps -- V stock has outperformed after Dow losing streaks of at least six days. Since 2010, there have been 13 of these instances -- not including the current losing streak, which is set to extend to eight days today. A month after these dismal DJI stretches, V shares averaged a gain of 5.04% -- the best of all Dow components.


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