Best Blue Chip for Third Quarter

Visa stock could hit record heights again soon

by Andrea Kramer

Published on Jun 28, 2019 at 2:49 PM

The Dow Jones Industrial Average (DJI) is set to wrap up its second-best month since October 2015, with the index pacing for a June gain of more than 7%. What's more, if past is prologue, the summer rally could have legs. According to Bespoke Group, July has been the strongest month of the year for the Dow over the last century, with the index averaging a gain of 1.57% and ending higher 64% of the time. Meanwhile, one blue-chip stock has also outperformed in summertime: credit card concern Visa Inc (NYSE:V).

In fact, Visa is the only Dow stock -- and eligible S&P 500 Index (SPX) member -- with at least eight years' worth of returns that has racked up a 100% win rate in the third quarter over the last 10 years, per data from Schaeffer's Senior Quantitative Analyst Rocky White. On average, V shares have gained a healthy 7.29% in the quarter.

So far in 2019, the blue chip has been on fire. V stock is up more than 30% year-to-date, supported by its 20-day and 50-day moving averages. The equity just notched an all-time high of $174.94 on June 25, before taking a slight breather. From V's current price of $171.42, another 7.3% pop next quarter would place the security just under $184 -- and in uncharted territory.

V stock chart june 28

Should the stock extend its third-quarter winning streak, an exodus of option bears could propel V even higher. The stock's Schaeffer's put/call open interest ratio (SOIR) of 0.97 is in the 96th percentile of its annual range, suggesting near-term traders have rarely been more put-heavy in the past year.

A short squeeze could also add fuel to Visa's fire. Short interest jumped more than 20% in the past two reporting periods, and now represents nearly a week's worth of pent-up buying demand, at V's average pace of trading.

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