The chart of American Express (AXP) was looking quite promising into early July, with a strong uptrend phase off the early April low. Over the last four weeks, a pullback has changed the complexion of this chart, which now appears to be a classic example of a double top pattern. Now AXP is testing a key support level, and any further weakness could confirm a bear phase in August. The daily chart features a clear double top pattern, with the early July peak around $328 lining up well with the February top at $325. Now a double top pattern is only confirmed once you have a pullback after the second peak, and AXP has followed through to the downside in impressive fashion. The stock is now down about 11% off the July high, and the credit card giant is now testing key moving average support. American Express bounced off the 50-day moving average in mid-July, providing a brief respite from a strong downtrend phase. After a one-week bounce higher, sellers once again took control and pushed the stock down to its 200-day moving average. A hammer candle at the beginning of August indicated a likely short-term bounce, but we still see a breakdown as a likely scenario here. A quick analysis of volume trends shows how AXP has now entered a confirmed distribution pattern, with selling pressure outweighing buying power over the last month. Note the strong volume on down days, shown as a red histogram below the price bars, suggesting an influx of sellers in recent weeks. We can also use the Chaikin Money Flow (CMF), shown in the bottom panel, to analyze trends in daily volume readings. Given the strong down days in recent weeks, it’s not surprising to see the CMF has now dipped below zero to confirm a distribution phase. Until the Chaikin Money Flow pushes back above the crucial zero level, this chart suggests heavier downside volume and a strong chance of continued price deterioration. A closer look at the daily chart reveals that the 200-day moving average actually coincides fairly well with the 38.2% Fibonacci retracement level based on the April to July rally phase. This represents a “confluence of support” and suggests that any break below $287 would mean a likely continuation of the downtrend. In terms of downside targets, we can use this Fibonacci framework to identify further potential support levels. The 50% level around $275 could serve as secondary support, but we’d be looking for a potential downside target around $262. That would mean a 61.8% retracement of the spring rally phase, and represent about a 20% drop from the July peak. If AXP does manage to bounce higher off the 200-day moving average, we’d look for a break back above $305 to negate the bearish thesis. If this financial services firm can regain the 50-day moving average, and do so with an improved volume and momentum profile, we’d be interested in further upside moves in the coming weeks. But for now, the technical configuration suggests weakness over strength. – David Keller, CMT marketmisbehavior.com DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
