Visa and Mastercard have surged to new highs, but their rally may be about to go bust

Visa and Mastercard scored record highs Wednesday after a massive charge up this year. Buyer beware, said one market watcher.

“I’m a little cautious here. They’re getting very overbought,” Matt Maley, equity strategist at Miller Tabak, told CNBC’s “Trading Nation” on Wednesday.

A 24 percent year-to-date rally and four straight months of gains has placed Visa as the second-best performing stock in the Dow in 2018.

Maley has worries over its technicals, however. Its monthly relative strength index has not dipped below 80 this year. An RSI, which measures overbought or oversold conditions, is typically considered overbought when a measurement reads above 70.

Mastercard is even worse, said Maley.

“On Mastercard, it’s above 90. In fact, it’s above 92. That’s the highest it’s ever been so it’s the most overbought it’s ever been,” he said.

Mastercard’s monthly RSI exceeded 95 in July. Its shares are up 41 percent in the year to date, putting it on track for its eighth straight year in the green.

“That doesn’t mean these aren’t good companies, that they don’t have good fundamentals, but they’ve had a big run,” added Maley. “They could go a little bit higher from here, but I’d want to buy them on weakness rather than chase them way up here.”

No matter the cost, Boris Schlossberg, managing director of BK Asset Management, is a devotee of both stocks.

“This is the type of trade I would just buy. If it comes in, I’d buy even more because I think long term these are some of the best stocks that we have in the digital universe,” Schlossberg said on Wednesday’s “Trading Nation.”

Schlossberg says both companies’ strong fundamentals make up for any kind of nerves over their steep rallies.

“They have unbelievable business models. As a matter of fact, I think they’re sort of the real bitcoin, save for the anonymity, because they are the true digital cash of our present,” said Schlossberg. “Their moat is so huge at this point.”

Visa beat earnings and sales estimates in its release after the bell Wednesday. Mastercard is set for Thursday morning.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's Closing Bell (M-F, 3PM-5PM ET). In addition, he contributes to CNBC and CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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