3 Credit Services Stocks Positioned at Key Multi-Year Support Levels

Americans allocate 41% more budget to groceries than dining out

At first glance, credit services firms might seem vulnerable as governments enforce travel restrictions and social distancing to combat the COVID-19 pandemic. Understandably, the sharp drop in consumer spending on sectors like summer travel and dining has led many major companies to revise down their quarterly and annual earnings forecasts.

However, recent nationwide panic buying of essential goods indicates a surge in transaction volumes for grocery and supermarket retailers, as consumers stock up in preparation for the pandemic. Even prior to COVID-19, Americans spent 41% more on groceries than on eating out, according to data from location analytics provider Esri, cited by cnbc.com. Additionally, credit services providers stand to gain from the growth in subscription-based services such as Microsoft Office 365 and Netflix, driven by an increase in remote work.

Below, we analyze three prominent credit services stocks, highlighting potential trading opportunities based on critical chart support levels.

Visa Inc. (V)

Visa Inc. (V) delivers credit payment solutions to consumers, financial institutions, and businesses, processing nearly $9 trillion in purchase transactions last year. The company is well-positioned to strengthen ties with grocery retailers after reducing swipe fees for supermarket merchants on $50 premium card purchases from $1.15 to 77 cents. Earlier this month, Visa projected second-quarter revenue to be 2.5% lower than prior estimates, reflecting reduced spending amid the pandemic. Despite an 18.81% decline year-to-date, Visa has outperformed the broader credit services sector by nearly 8% as of March 20, 2020. Investors also benefit from a 0.81% dividend yield.

Visa shares dipped below a key multi-year support level at $150 on Wednesday but rebounded to close above this important threshold yesterday. Swing traders entering at this level should consider taking profits near $170, where resistance aligns with previous support zones. Risk management suggests setting stop-loss orders below the recent low of $139.80 to limit downside exposure.

Mastercard Incorporated (MA)

Mastercard Incorporated (MA) provides transaction processing and payment-related services globally. Valued at $228.31 billion, Mastercard is collaborating with the Bill and Melinda Gates Foundation and Wellcome Trust to accelerate COVID-19 treatment development, contributing a combined $125 million. The company cautioned that annual revenue growth could fall "at the low end of the low-teens range" if pandemic effects remain confined to Q1, according to businessinsider.com. As of March 20, 2020, Mastercard offers a 0.70% dividend yield and has declined 23.79% year-to-date.

Although Mastercard's share price closed lower yesterday, it maintained support above the critical $220 level, a price floor established during the September/October 2018 highs. Traders considering entry might target profits near $260, where resistance aligns with a horizontal trendline. Placing a stop-loss below this month's low at $211.15 can help protect against further declines.

PayPal Holdings, Inc. (PYPL)

PayPal Holdings, Inc. (PYPL) operates a technology platform offering digital payment solutions for consumers and merchants, including online payment gateways accepting cards and digital wallets. In 2018, PayPal partnered with Microsoft Corporation (MSFT) to advance digital workplace initiatives, enhancing agility and collaboration—an increasingly valuable alliance amid widespread remote work during the pandemic. PayPal's market cap stands at $109.90 billion, with shares down nearly 14% as of March 20, 2020.

The stock's sharp drop to a multi-year horizontal support near $90 presents an attractive entry point for tactical traders. Long positions could aim to take profits around $110, where resistance is reinforced by multiple swing points and the 200-day simple moving average (SMA). Risk management strategies include placing stop-loss orders below the March 18 low at $86.15 and adjusting stops to breakeven if the price surpasses the psychological $100 mark.

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