Is January a good month for buying American Express shares?

By: Stanko Iliev
Stanko Iliev
Stanko dedicates himself to providing investors with relevant information they can use to make investment decisions. He loves the… read more.
on Dec 21, 2020
  • American Express announced that the card fee growth would not return to double digits until 2022
  • If the price falls below $100, it would be a firm "sell" signal and maybe a sign of the trend reversal
  • American Express reported a 20.4% Y/Y decrease in revenues in Q3

The stock market has collapsed at the beginning of this trading week on fears that a new variant of COVID-19 is more contagious and more dangerous. American Express (NYSE: AXP) is a stable company but maybe now is not the right moment to invest in these shares because the price could weaken even more in January.

Fundamental analysis: American Express’s business will be affected by the COVID-19 pandemic certainly the next two years

Concerns around the Covid-19 pandemic continue to dominate the financial markets despite the fact that U.S. lawmakers reached a compromise, and a $900 billion coronavirus relief package is on the way. American Express Company shares are also under pressure, but as long the price is above $100 support, there is no risk of the bear market.

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“Fiscal stimulus is clearly fading as a catalyst, with COVID trends dictating the direction of markets. Risk assets had been shrugging off worsening virus trends, but are now showing some signs of vulnerability – even with the backstop of additional stimulus,” said Emily Roland, co-chief investment strategist at John Hancock Investment Management.

American Express is an American multinational financial services corporation that operates in credit card and traveler’s cheque businesses. The company reported a 20.4% Y/Y decrease in revenues in Q3, and Q3 GAAP EPS came in at $1.30. Revenues have decreased mainly due to the Covid-19 pandemic, and the company announced recently that the card fee growth would not return to double digits until 2022.

“While credit remains strong, with delinquencies and net write-offs at the lowest levels we have seen in a few years, we remain cautious about the direction of the pandemic and its impacts on the economy, which is reflected in our reserve levels,” said AXP Chairman and CEO Stephen J. Squeri.

When trading this stock, investors should have in mind that this is a stable company but now is not the right moment to invest in American Express because it could weaken even more in the upcoming period. American Express’s business will be affected by the COVID-19 pandemic certainly the next two years, and there are some apparent risks when it comes to buying this stock.

Technical analysis: As long the price is above $100 support, there is no risk of the bear market

Data source: tradingview.com

The important support levels are $100 and $90; $120 and $130 represent the resistance levels. If the price jumps above the $120 resistance, the next target could be around the $130 level, but if the price falls below $100, it would be a firm “sell” signal and maybe a sign of the trend reversal.

Summary

Concerns around the Covid-19 pandemic continue to dominate the financial markets, and American Express shares are also under pressure. American Express is a stable company but now is not the right moment to invest in American Express shares because the price could weaken even more by the end of January. If the price falls below $100 support, it would be a firm “sell” signal and maybe a sign of the trend reversal.

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