Options Trade – Visa Inc (NYSE:V) Puts
Tuesday, April 29, 2014

**OPTIONS TRADE: Buy the V Jun 2014 190.000 put (V140621P00190000) at or under $2.40, good for the day. Place a protective stop limit at $0.95 and a pre-determined sell at $5.00.

by Ian Harvey

April 29, 2014

Introduction

Visa Inc (NYSE: V), as well as its peers, had a rough go of it in March, losing more than 15% from its March high to its low on April 11. On the way down, it sliced through chart support at roughly $212 and left its 50-day moving average in the rearview mirror. It also moved below its 200-day average before rebounding with the broader market.

Financials as a sector continue to lag, so V is fighting an uphill battle that it is likely to lose. It is currently trading just below its former support level, which is now acting as resistance.

Normally, we'd have to give the bulls the benefit of the doubt here because the stock did not fall soon after reaching this plateau. The reason we can't is that volume during the rebound rally declined each and every day. This is the hallmark of a corrective bounce rather than a bullish turnaround, and it suggests there was not an increase in demand at recent "sale" prices.

Company Details

Visa Inc. (Visa) is a global payments technology company that connects consumers, businesses, financial institutions and governments in more than 200 countries and electronic payments. The Company operates in Payment Services.

The Company operates processing networks VisaNet, which facilitates authorization, clearing and settlement of payment transactions worldwide. It also offers fraud protection for account holders and assured payment for merchants. The Company operates an open-loop payments network in which Visa connects and manages the exchange of information and values between: issuers, which includes financial institutions that issue Visa-branded cards or payment products to account holders, and acquirers, which includes financial institutions that contract with merchants to accept Visa-branded cards or payment products.

Key Statistics for V

Current P/E Ratio (ttm) 23.8395
Estimated P/E(09/2014) 22.5101
Relative P/E vs. SPX 1.3915
Earnings Per Share (USD) (ttm) 8.4490
Est. EPS (USD) (09/2014) 8.9480
Est. PEG Ratio 1.2697
Market Cap (M USD) 155,219.89
Shares Outstanding (M) 499.40
30 Day Average Volume 4,295,322
Price/Book (mrq) 5.6895
Price/Sale (ttm) 10.5166
Dividend Indicated Gross Yield 0.79%
Cash Dividend (USD) 0.4000
Dividend Ex-Date 05/14/2014
5 Year Dividend Growth 35.90%
Next Earnings Announcement 07/24/2014

Other Factors Pulling Visa Down

1. There is a sentiment condition that is also working against V. Stocktwits, the social media site for stock traders, reports a 91% bullish reading by its users. When sentiment on any stock or market gets that lopsided we have to be concerned that everyone who wanted to get into Visa has already done so. That leaves little demand to push prices higher and flashes a warning sign.

2. There is also a long-term condition working against the stock. We can argue that the January and March peaks formed a double-top pattern that was confirmed with last month's breakdown. Making it worse, the decline broke a three-year rising trendline to the downside.

3. The Dow is also suffering from a back-lash associated with the rising tensions in Ukraine. The Dow and S&P component Visa is competing with Facebook for second place in the biggest-large-cap-loser contest on the S&P. Visa's 3.5% drop is the Dow's worst, and it would have a greater impact on the S&P than Facebook's if its $130 billion market cap were a bit larger.

Visa's woes are more closely tied to Ukraine tensions than perhaps any other major stock on American markets, as the payment processor warned investors that political blowback against Russia -- whose annexation of the formerly Ukrainian territory of Crimea is the source of all this tension in the first place -- could shave "several pennies" off of 2014's earnings. Visa reported earnings after Thursday’s close; the remarks on Russia came during the company's earnings call, in which CEO Charlie Scharf noted that Visa has "100 million cards [in Russia] and it's not in anyone's best interest, inclusive of the Russians, to make those cards not available to their own citizens."

American and European politicians are considering economic sanctions against Russia, and such penalties would undoubtedly harm American and European financial companies with strong business in the country.

Conclusion

If the market stays strong, then Visa could be pulled higher to negate all of these breakdowns. But with a lagging sector and serious technical damage on its own chart, that seems like a long shot.

Therefore, based on the facts above the following options trade is recommended…..


**OPTIONS TRADE: Buy the V Jun 2014 190.000 put (V140621P00190000) at or under $2.40, good for the day. Place a protective stop limit at $0.95 and a pre-determined sell at $5.00.



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Options traders win because they are successful.



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