Mapping the Market: Warnings of more losses for Mastercard shares, but ray of hope for bulls
By Christopher Romano
Oct 2 (Reuters) - Shares in Mastercard MA.N have fallen around 8% since hitting a record closing high in August and the stock could be in for another slide of roughly that magnitude if some of the signals derived from technical analysis prove correct — though bulls are not without a glimmer of hope.
Click here for a detailed technical analysis chart.
Mastercard made a record close of $599.86 on August 24, according to data supplied by LSEG, and after two days of attempting to further those gains, the stock began retreating into early September. It has been zigzagging down since then, culminating in an intraday low of $546.12 on Thursday, its weakest since July 27.
In downward moves such as this, technical analysts look to statistical tools that measure volatility and momentum to see if the slide has staying power. Several of these gauges have been signaling more losses recently.
Bollinger Bands are one of these tools. A moving-average-based system that measures volatility, its bands are trending lower, a sign that indicates further declines.
One closely watched indicator of momentum — Moving Average Convergence Divergence — is also pointing lower. As the name suggests, MACD is based on moving averages.
Another momentum gauge, the Relative Strength Index, has also been indicating that the current downtrend could continue without having to pause, meaning that the stock is not oversold.
A key test with RSI is how it behaves when a stock hits a new low. In this regard, the index has been confirming each new low in price by hitting a low of its own, including on Thursday.
In addition to statistical indicators, technical analysts often rely on patterns that occur regularly on charts and can indicate changes in momentum or direction. One such formation, known as a head and shoulders, appears to be taking shape on Mastercard’s chart. This particular pattern is bearish and indicates that the stock can continue retreating from its summer highs.
With a head and shoulders, technical analysts calculate the scale of potential losses — called a measured move — based on the size of the formation. This would suggest Mastercard could fall to the $500-$505 area, with potential stopping points along the way at the $540 and the $515 zones.
However, one promising pattern emerged late on Thursday that may give bulls hope. It came in the form of what analysts call a doji, which is when the closing price comes near the open and away from the upper and lower extremes of the day. A doji is often interpreted as a sign of indecision. After a fall it can signal that market participants are pausing to consider whether they want to continue selling.
If Mastercard shares can rally on Friday back above Thursday's high of $557.20 then bulls might be back in business. A further rise above the $571-$572 area would change the bearish narrative altogether.
Mastercard did not immediately respond to an email requesting comment.
What the chart shows:
Mastercard shares have been falling since a record closing high of $599.86 on August 24
Targets for losses: $540, $515 and then $500-$505 area
Bearish signals dissipate with a rise above $557.20 and $571-$572
(Mapping the Market is a daily column written by Reuters journalists. The commentary is based on a technical analysis of financial charts, which helps assess the likelihood of future price moves but does not guarantee the outcome. The column does not constitute investment advice or trading recommendations. )