Friday was apparently “fold ’em” day for traders and investors who had bought credit card stocks earlier in the week. With stocks like Mastercard (NYSE: MA) trading higher by more than 10% from its levels a week ago and Visa (NYSE: V) up well over 9% over the same time period, there should be no surprise in finding traders in a profit-taking mood on Friday. Shares of both Mastercard and Visa pulled back by a little over half a percent.
That describes trading above the 200-day moving average, where pullbacks and profit-taking are often short-term opportunities for active investors. Right now, howevr, heading into trading on Monday, both MA and V have neutral, 4 out of 10 ratings. This means that it will require either additional volatility or a return to more overbought conditions before these stocks have edges significant enough to attract traders into the market.
In and around bear market country, on the other hand, buyers are still in the hunt for shares of lesser game: issuers like Discover Financial Services (NYSE: DFS) which closed higher for a third day in a row, and Capital One Financial (NYSE: COF).
Shares of Capital One Financial are up more than 13% from their close a week ago. And in finishing ahead by over 1% on Friday, COF has closed in overbought territory for a third day in a row.
Higher prices in COF have meant lower ratings for the stock, especially since Capital One Financial has been trading in bear market territory since early August. Ahead of trading on Monday, shares of COF have a rating of 2 out of 10 for a second day in a row, keeping the stock in our “consider avoiding” category.
These “consider avoiding” stocks are stocks that have typically become short-term overbought and rallied to levels where those overbought conditions, historically speaking, have been unsustainable. The last time shares of COF earned a 2 out of 10 rating was back in mid-August. The stock finished lower for the next five days in a row, shedding more than 8%.
The stocks in today’s report were drawn from the data and research available through PowerRatings. To find out more, click here.
David Penn is Editor in Chief of TradingMarkets.com