Put Capital One In Your Wallet Or At Least On Your Radar

American Express (AXP) broke higher last Friday, only to pullback Wednesday. Discover Financial Services, (DFS) has been trending higher since June, but it was hit as well, falling 2% like American Express. The big guys, Mastercard (MA) and Visa (V) took a bit of a hit, but less than 1% and stayed within their recent consolidation zones.

These downward moves happened with the only real news in the sector coming from Capital One Financial (COF). ING is selling their roughly 10% stake in the card company. What happened to them? Oh, they had less than a 1% change in their stock price. A 10% dilution moved the stock 67 basis points. Why is this important? That is where the technicals come in.

Capital One Financial (COF)

The chart above shows that the stock has been consolidating under the 57.50 resistance area with a Relative Strength Index (RSI) that is holding bullish and a Moving Average Convergence Divergence indicator (MACD) that is running near zero. Consolidation at resistance as news of a 10% dilution is hitting, and the stock just moves with the market. I take away two things from this.

First, clearly this was priced into the stock. As others in the sector did break out this stock did not perhaps because the dilution was coming. Second, now that it is here, the stock may be free to break out of consolidation and follow Discover higher. The target on the channel break higher takes it to 66.50 with a smaller Measured Move first to 59.25. The 3-box reversal Point and Figure chart suggests it has even more in the tank with a price objective of 71. Time to start watching.

Disclaimer: The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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