American Express (AXP) fell sharply, dropping over 4% after President Trump announced a possible cap on credit card interest rates at 10%. This decline followed a significant rally where AXP’s stock had risen more than 70% from its lows. The recent drop was influenced not just by this news but also by technical signals indicating potential further declines. On the daily chart, the stock tried to break below its key upward trendline, which had offered support during the rally. This breach is important as it suggests the possibility of ongoing downward pressure.

Trading Strategies for American Express

There are two trading strategies to consider. Traders might wait for a clear break and confirmation below the trendline, or they might look for a retracement back toward the trendline and then observe for rejection. Both approaches allow for clear risk evaluation. American Express is a major financial services company, with its stock often affected by news and policy changes. This mix of strong trading trends and sensitivity to headlines makes AXP a focal point for both long-term investors and active traders. It’s crucial to maintain disciplined risk management, especially after big moves. After the sharp 4% drop in American Express, we’re seeing a noticeable rise in implied volatility. This is a direct response to the news of a potential 10% cap on credit card interest rates. For derivatives traders, this means that option premiums are higher, reflecting increased market uncertainty and fear.

Implications of the 10% Credit Card Interest Rate Cap

With AXP stock now testing an important upward trendline established since the lows of 2025, we should consider bearish positions. Buying put options with February or March expirations is a simple way to profit if the stock breaks below this technical support level. This strategy offers direct exposure if the selling pressure continues in the coming weeks. This political news is significant, especially since U.S. consumer credit card debt exceeded $1.3 trillion at the end of last year. With the average credit card APR around 24% for 2025, a mandatory 10% cap would significantly challenge the industry’s business model. These facts indicate that the market is responding appropriately to the news. For a more cautious approach, we can adopt the idea of a retracement. If AXP bounces back toward its previous trendline, we could execute a bear call spread. This defined-risk strategy would be profitable if the stock fails to regain its prior momentum and faces rejection at that resistance level. A similar situation unfolded in the financial sector before, like when the Durbin Amendment was debated in 2010, capping debit card fees. Regulatory threats often exert sustained pressure on financial stocks long after the initial news. History suggests this could be more than a one-day event for AXP and other companies in the sector. After a substantial 70% rally from last year’s lows, the stock was already in a vulnerable position. The combination of stretched technical indicators and a serious fundamental threat makes defined-risk bearish strategies appealing. Managing position size is essential, as a rebound is always possible, but the current setup favors sellers. Create your live VT Markets account and start trading now.

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