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American Express Looking For Bearish Gap Fill

Published May 4, 2017
3:59 AM

On May 3, 2017, American Express Company (AXP) crossed below its 50 day moving average (DMA). Historically this has occurred 406 times and the stock does not always drop. The median drop is 4.538% and maximum drop is 45.566% over the next 20 trading days.



AMERICAN EXPRESS COMPANY Chart From TradingView.com

When we take a look at other technical indicators, the relative strength index (RSI) is at 50.4969. RSI tends to determine trends, overbought and oversold levels as well as likelihood of price swings. I personally use anything above 75 as overbought and anything under 25 as oversold. The current reading declares the stock has been slightly volatile. It is currently trending down since the recent post-earnings gap up. The stock can continue to go down with less volatile price swings.

The true strength index (TSI) is currently 2.3520. The TSI determines overbought/oversold levels and/or current trend. I solely use this as an indicator of trend as overbought and oversold levels vary. The TSI is double smoothed in its calculation and is a great indicator of upward and downward movement. The current reading declares the stock was trending down, but has recently turned upward. This indicator is typically delayed so the bend upward is not always indicative of further upward movement.

The positive vortex indicator (VI) is at 0.9408 and the negative is at 0.8340. When the positive level is higher than 1 and higher than the negative indicator, the overall price action is moving upward. When the negative level is higher than 1 and higher than the positive indicator, the overall price action is moving downward. The current reading declares the stock has been neutral since the post-earnings gap up. With both indicators below 1, anything can happen.

The stochastic oscillator K value is 57.5145 and D value is 69.9118. This is a cyclical oscillator that is highly accurate and can be used to identify overbought/oversold levels as well as pending reversals and short-term activity. I personally use anything above 80 as overbought and below 20 as oversold. When the K value is higher than the D value, the stock is trending up. When the D value is higher that the K value the stock is trending down. The current reading declares the stock exited overbought territory and should continue to decline.

Considering the moving average crossover, RSI, TSI, VI and stochastic levels, the overall direction appears to be pointing down. Based on historical movement compared to current levels and the current position, the stock could drop at least 2.70% over the next 20 trading days.

DISCLOSURE: I currently do not have positions in the stock mentioned above. I do not plan to enter a position within the next 72 hours. Historical movements and technical indicators should never be the sole basis for entering positions involving risk. Make sure appropriate research is conducted prior to taking any risk in a marketplace.

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