Options Activity for MasterCard Incorporated (MA) and Visa Inc. (V).
Friday, September 13, 2010



I hope that your trading is going well, as I know that members of S.O.M.E. are making the most of the market movements and their returns.



Today's newsletter looks at MasterCard Incorporated (MA) and Visa Inc. (V) where, thanks to new, stricter legislation, these credit card titans have been attracting bearish brokerage attention of late.

The most recent negative note hit the Street this morning, as Bernstein downgraded both MA and V to "market perform" from "outperform."

The brokerage firm also adjusted its price targets, cutting V's to $77 from $93 and MA's to $216 from $268. The new price targets imply expected upside of about 13% from Friday's close, in Visa's case, and about 9% from Friday's close, in MA's case.

MasterCard Incorporated (MA)

MA shares have reacted by slumping to a new annual low today, with the stock bottoming out at $191 right out of the gate. The shares recently breached short-term support at $195, and the round-number $190 neighborhood seems like the next potential technical floor for MA.

In the options pits, sentiment is starting to lean toward the pessimistic end of the spectrum. MA's 10-day International Securities Exchange (ISE) put/call volume ratio of 0.88 ranks in the 70th annual percentile, suggesting that options players have been purchasing bearish bets over bullish at a faster pace than usual.



Visa Inc. (V)

As for V, the equity touched the latest in a string of new annual lows this morning, falling as far as $65.70 in intraday action. The security's slide has accelerated since Sept. 8, when V staged a decisive breach of support at the $70 level.

Just like its sector peer, V has become a preferred target of bearish speculators. Short interest on the stock swelled by more than 39% during the past month, as a fresh crop of short sellers placed bets on the equity's technical swoon. A continuation of this short-selling activity could act as an additional headwind for V during the short term.



Conclusion

It's worth noting that both stocks are fast approaching oversold status. MA's current Relative Strength Index (RSI) stands at 37, while V's RSI is docked at a similarly slim 35. With both equities trading several points below resistance at their 10-day and 20-day moving averages, MA and V could actually be due for an oversold bounce during the next several sessions. Against this backdrop, the stage looks set for some volatile price action in the short term.



Success is simple. Do what's right, the right way, at the right time.




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