American Express Trading Higher After Solid Quarter

Dow component American Express Company (AXP) is trading higher by less than a point on Thursday morning after beating first quarter earnings per share (EPS) expectations by four cents and meeting revenue expectations at $10.36 billion. Year-over-year revenues rose a respectable 6.6% after a 7.9% increase in the fourth quarter. The company reaffirmed 2019 guidance as it did in early April, expecting $7.85 to $8.35 EPS and 8% to 10% revenue growth.

American Express stock reversed within 30 cents of the 2018 high near $114 after Apple Inc.'s (AAPL) Apple Card release in March, indicating that shareholders are worried the initiative will take market share from credit services giant. However, Visa Inc. (V) and Mastercard Incorporated (MA) have gained ground since that time, suggesting that those concerns are either overblown or specific to Amex's higher-end clientele.

AXP Long-Term Chart (1992 – 2019)

A multi-year downtrend ended at a split-adjusted $4.63 in 1991, giving way to a powerful trend advance that continued into the October 2000 peak at $55.15. That marked the highest high for the next six years, ahead of a volatile decline that found support near a three-year low after the Sept. 11 attacks in 2001. It tested that level in October 2002 and turned sharply higher, posting impressive returns throughout the mid-decade bull market.

The uptick stalled within 15 cents of the 2000 high in 2006, yielding a shallow pullback, followed by a breakout that carved two rally waves into the 2007 high at $65.89. The stock broke 18-month support in the low $50s at year end, initiating a downtrend that accelerated during the 2008 economic collapse. Intense selling pressure finally ended at a 14-year low in March 2009, generating a historic buying opportunity, ahead of a V-shaped recovery that completed a round trip into the prior high in 2013.

The subsequent breakout gathered strength into 2014, topping out in the upper $90s, ahead of a steep decline that posted a four-year low near $50 in the first quarter of 2016. Committed buyers then returned in force, carving the second V-shaped recovery wave in nine years and lifting the stock into the 2014 high in the fourth quarter of 2017. Price action since that time has been mixed, with a series of new highs interrupted by deep lows that broke support.

AXP Short-Term Chart (2017 - 2019)

The uptrend that started in 2016 reached the 2014 high in November 2017, yielding nearly nine months of sideways action, ahead of a volatile uptrend that posted an all-time high at $114.55 in December 2018. A sell-off cut through support three weeks later, followed by a strong bounce that stalled within a few cents of last year's high after the Apple news. The subsequent pullback ended at $108.19 on March 25, establishing a level that will set off a sell signal if broken in the coming sessions.

The on-balance volume (OBV) accumulation-distribution indicator confirms volatile 2018 price action, with September's new high giving way to December's 14-month low. OBV lifted to an all-time high in the first quarter of 2019, generating a tailwind that favors a healthy breakout in coming months. However, last year's whipsaws warn investors to act cautiously until the stock clears resistance.

The next rally to resistance will complete a cup and handle pattern that targets $140 following a breakout. However, the first quarter recovery wave is unstable because it carved few support levels, raising the odds for a deeper slide that tests $100 and the 200-day exponential moving average (EMA). The weekly stochastics oscillator may be forecasting this downturn, dropping into the panel's midpoint in the sixth week of a sell cycle.

The Bottom Line

American Express is trading higher after a strong earnings report but could fail to reward shareholders during the regular session.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.