Stocks to watch this week: Amex & IFAST
A continued comeback in the travel business and solid buying trends among younger consumers helped American Express beat profit forecasts Friday. The company reported net income of $2.1 billion, or $2.73 per share, compared with $2.2 billion, or $2.74 per share, versus consensus of $2.40 per share. American Express AXP total revenues, +3.58 percent, were $11.74 billion, up from $9.06 billion a year ago. This was in line with analyst estimates of $11.62 billion. Amex continues to expect full-year revenue growth of 18 to 20 percent and earnings per share of $9.25 to $9.65.
Lets look at the chart of American Express Company. The STRAC indicator works very well when applied to the chart of this stock. The price has recovered from its low every time it fell below the indicator for the past six times. The indicator makes trading this stock extremely easy if history repeats itself. Traders can make a good profit within 2 weeks if they were to buy the stock whenever the price breaks below the lower band.
Next, there are many good indicators from Sharechart that you can use to determine the strength of the current downtrend in American Express Company stock. The lines within the Random Walk Index indicators, the Aroon indicator, the Elder Ray indicator, and the Kling Volume Oscillator indicator are all widely used. It is not just one, but four different indicators that send a common message that the downtrend is indeed overextended and thus the probability of a rebound is high.
The ShareChart scanner also detected a “Double Top” looks alike chart pattern that formed from the first week of March to early May. This chart pattern looks like a “Double Top” chart pattern although it does not exactly meet all the conditions of a “Double Top” chart pattern. Nevertheless, the chart pattern is useful in determining the potential price target for the current trend.
If we measure the distance between the high and the neckline of the “Double Top” chart pattern and project it down, the 100% downside target is about $154.55, as shown on the chart. This coincided with the lowest bar on the chart on 12 May 22. This is another sign that the price hit a short-term low on that day.
Assuming a trader would buy this stock at the current price, he can next use ShartChart’s Fibonacci indicator to determine the next upside potential. Using the Fibonacci indicator to measure the distance between the high and low the downtrend yields a 50% retracement value of about $171, as shown on the chart. This is the immediate price target for the rebound. The next target could be around $176, which is the 61.8% Fibonacci retracement value.
Next, the Sharechart “Volume Profile” indicator (VP) can be used to determine if 1.) the current price is considered oversold and 2.) the upside price target explained above is likely to be reached.
First, the VP indicator shows that the value reached its lowest level on May 12 as shown by the blue horizontal line on the chart. This indicates that the price may have bottomed out on that day.Similarly, the price had bottomed and reversed trend on November 30 last year when the value of VP reached the lowest level.
Secondly, the red line of VP indicator shows that the value was around $174, which means that the traded volume was the highest of the last 6 months. This should serve as a resistance level or price target in the event of a recovery. This also coincided with the 50% to 61.8% Fibonacci retracement level as explained above.
If history repeats itself, a trader who buys around the current price and sells at the potential target price of about $174 could make a good profit of 15% within the next two weeks.
Next, if we set the stop loss at $150, which the lowest points on the chart, we get a good risk-reward ratio of 174. A value above 100% is considered a good.
Before we decide to buy the stock, let us look at recent developments at American Express. On Thursday, the company continued to raise its APR in response to the Federal Reserve raising its benchmark interest rate. With the Federal Reserve planning to gradually raise the federal funds rate through 2022, it is unlikely that this will be the last APR hike this year.
American Express has also taken steps to improve security by partnering with Google to make shopping easier with an added layer of security. When using Chrome and Android Autofill.
To gain market share, American Express will now allow cardholders to cancel a flight for any reason.
While the world is full of uncertainty, the results are in line with the ambitious development goals we discussed earlier this year.”
After the results were announced, Chief Financial Officer Jeff Campbell said he still does not think there will be a recession.
In a private placement, iFast is seeking to raise S$75 million to buy an 85 percent stake in BFC Bank Limited from BFC Group. This is part of its strategy to reach its lofty target of S$100 billion by 2028. This is a uphill task for iFast as they are up against the big players in the market, the banks.
Even banks in Singapore, like OCBC, have been actively buying up other banks to grow their own assets. So has DBS. This is even though they are already collecting large deposits at low cost, making it much more profitable for them to invest in financial instruments such as stocks, bonds and mutual funds. iFAST needs to do just that to increase its market share.
iFAST needs to attract assets by acquiring more financial licenses in different countries, which will be a difficult task for them as they are only used to growing organically in Singapore. iFAST also needs to inject more funds to turn around the losses of the UK bank, whose profits are not expected until 2025.
Why has iFast set such a lofty goal? Because the company is doing so well that it is now one of the best performing stock in Singapore! iFast’s share price is up more than 8 times compared to less than 6% for the STI index.
Because their company is “covid-proof”, iFAST’s assets increased dramatically during the outbreak. iFast reported strong revenue growth of 23 percent and a 23 percent increase in net income in the third quarter. In the last nine months, the company has generated S$161 million in revenue and S$23 million in net profit, both significantly higher than last year. Return on investment was 27 percent, up from 22 percent a year earlier.
iFast grew its revenue to S$161 million in just nine months from S$101 million in 2017, on capital investment of just S$56 million in the past five years. In a sense, the company is capital efficient.
iFast’s net profit increased from S$7.7 million to S$23.4 million over the same period. That’s a 203 percent increase on a small investment. In addition, iFast has no outstanding debt.
Next, let’s look at the chart of iFast.
When we read the Aroon indicator in the Ifast chart, the spread between “Aroon up” line and the “Aroon down” line on April 27, 2202 was very wide. This suggests that the downtrend is overstretched and may be reversing. This implies that iFast may be oversold and could recover soon.
The Aroon indicator, developed in 1995, is a technical indicator used to detect changes in the price trend in an asset and the strength of that trend.
The indicator consists of the “Aroon up” line, which measures the strength of the upward trend, and the “Aroon down” line, which measures the strength of the downward trend.
Similarly, the spread between the lines in the Random Walk Index and Elder Ray indicators are very wide. All indicators show that the downtrend is overstretched. We are waiting for a golden cross to confirm a trend change in iFast.
The price of iFast stock has broken below the lower band of the STARC indicator, hitting a low on April 27. Buying below the band may look good, but if the lower band and the price continue to fall, the signal was bad. This often happens when price reaches a band but then the band and the price continues to move in that direction.
To make sure this does not happen, we can use another indicator from Sharechart as a guide, the “Rainbow Oscillator”. As you can see on the chart, there was a clear divergence between the Ifast price and the “Rainbow Oscillator”. This means that the Ifast price is making new lows, while the “Rainbow Indicator” is making a “higher low”, as seen on the chart.
This is a sign that the downtrend is losing momentum and there is light at the end of the tunnel for the current downtrend.
Next, we use the Fibonacci retracement method to determine if iFast stock price has indeed reached its downside target and is ready to recover from here. As can be seen on the chart above, iFast stock price has crossed above the 50% retracement level of $5.40 but has yet to reach the 61.8% retracement level of $4.30. Thus, the downtrend price target is in this area.
The Fibonacci measurement is taken from the high to the low on the chart since March 2000.
From a fundamental analysis perspective, iFast is a good buy now if you take a longer-term perspective. In addition to iFast’s aggressive plan to fight the biggest players in the market and its strong performance over the past few years, there is another bright spot that comes from its Hong Kong operations. The company could achieve sales of at least HK$1.5 billion in less than 5 years, with a strong profit margin of at least 33%.
For those investors who are interested in ifast should start accumulating the stock at current price and there could potentially be more than 13% return within the next 2 weeks.