American Express Stock Breaks Out to Retest Highs

American Express Company (AXP) shares rose nearly 6% on Thursday after the company reported better-than-expected first quarter financial results following the bell on Wednesday. Revenue rose 11.6%  to $9.72 billion – beating consensus estimates by $580 million – while earnings per share of $1.86 beat consensus estimates by 15 cents per share. Card member spending rose 12%, while the effective tax rate dropped from 32% to 22%.

Analysts responded favorably to the financial results on Thursday morning, which helped send shares higher on the day. Goldman Sachs called the earnings beat the best since the third quarter of 2016, adding that full-year guidance could prove to be conservative. Meanwhile, Wells Fargo analysts noted that the solid credit performance eliminates one of the key points that bears have made and maintained an Outperform rating on American Express shares with a $115 price target. (See also: Why American Express Shares May Jump 14%.)

From a technical standpoint, the stock broke out from its pivot point and 50-day moving average at around $94.50 to nearly hit R2 resistance at $103.36 before falling back below trendline resistance at around $100.70. The relative strength index (RSI) appears a bit lofty with a reading of 67.73, but the moving average convergence divergence (MACD) remains in a bullish uptrend that suggests a bullish shift in momentum.

[Learn more about supplemental indicators such as the RSI and the MACD in Chapter 4 of the Technical Analysis course on the Investopedia Academy]

Traders should watch for a close above trendline resistance at $100.70 to confirm a breakout, but there could be some consolidation between trendline resistance and R1 support at $98.15, especially with the lofty RSI readings. A breakout from trendline resistance could lead to a move toward prior highs at R2 resistance at around $103.36, while a breakdown from R1 support could lead to a retest of the pivot point and 50-day moving average.

Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.