Be cautious chasing MA higher

2019年3月8日

This is a daily chart of Mastercard showing its impressive three year rally from $80 to current levels. The pattern is an undeniable Elliott Wave impulsive move higher, with an extended Wave 3 on strong momentum. After breaking out of its base channel in 2017, the stock put in a near parabolic rally (even on a log-scale chart) to its Wave 3 high around $225. Following the September 2018 high, MA corrected in three waves, finding support at the midpoint of the prior trend channel. With price now making new highs, it seems likely that the stock is in Wave 5. Therefore, we expect to see a topping pattern in coming months as momentum fades. The resulting sell-off should take MA back into and through the trend channel, ultimately finding some level of support at the Wave 4 low around $175.

This setup is notoriously difficult to time, as MA could continue to grind higher in Wave 5 for an extended period of time. However, if you're currently holding long positions, now may be a good time to start scaling out and taking profits. We're watching the 61.8% Fibonacci extension level of Waves 1 + 3 vs. Wave 5 as a potential area of resistance.