Visa Inc. stock started its uptrend from 41.80 in January 2009. Now, almost six years later, the stock is currently trading in the vicinity of 260. This 220-figure rise in under six years is more than enough to convince even the most conservative investors, that this stock is a good choice to invest in. And maybe that is the problem, because “when the consensus is strong, it’s wrong”. We have said it before and we are going to say it now once again: investing decisions should not be based only on rising prices. That is why we use the Elliott Wave Principle. It can tell us not only what is the direction of the trend, but it can also warn us if the trend is in its final phase and a reversal is near. On the chart below you can see how this impressive uptrend looks like. Its wave structure is noteworthy.
The weekly chart shows a clear five-wave impulse, which has been developing between the parallel lines of a trend channel. According to the Theory, every five-wave sequence is followed by a three-wave correction in the opposite direction. That is the reason why we think Visa is approaching the end of this long journey to the north. Wave 5 is already close to the upper line of the trend channel, which could serve as a resistance. In addition, the Relative Strength Index indicator shows a strong bearish divergence between waves 3 and 5, which is quite typical. So, we have three different reasons to think that Visa is in trouble: the wave structure, the trend line resistance and the bearish divergence. If this analysis is correct, investors should prepare for a three-wave pull-back, which could take prices down to 195 or even lower.
