JPMorgan Chase & Co.: JPM Stock Is Vulnerable

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Banking stocks as a group rallied last week on the back of some better-than-expected earnings reports. This allowed stocks like JPMorgan Chase & Co. (NYSE:JPM) to catch up a little with the broader market, but also bumped JPM stock back into a key area of technical resistance.

Beat the Bell: JPMorgan Chase & Co. JPMThis, coupled with lousy year-over-year earnings comparisons, leaves JPM stock vulnerable for another push lower.

While JPMorgan beat both top- and bottom-line estimates when it reported its latest quarterly results last week, the YOY comparisons were downright ugly. On this metric, the bank’s earnings per share dropped 14.5% and revenues fell 3.0%.

However, the analyst estimates won the coin toss, which is to say that since January, analyst earnings expectations for JPM fell about 18%, making it a lot easier for JPMorgan to beat.

While I think my former alma mater is a great banking institution, the earnings beat in my mind should take a backseat to the realities of the ugly YOY comparisons and an environment where U.S. interest rate hikes look increasingly unlikely. Add to this still weakening U.S. and global macro data, and it is difficult to see how JPM stock can keep up last week’s roughly 7% rally after the earnings report.

JPM Stock Charts

To get some perspective on JPMorgan, let’s note that ever since climbing above the low $50s in 2013, the stock has managed to hold this level as support on a monthly closing basis, as indicated by the monthly bars on the chart. However, it is equally apparent that since topping out in the summer of 2015, JPM stock has traded with a downward bias and making a series of lower highs.

Last week’s rally has not yet changed this picture.

JPM stock monthly chart
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Sliding over to the daily chart, we see that for medium-term investors, the stock’s red 200-day simple moving average has been a good line of reference for the past 12 months or so. At the February lows, JPM got very extended below this moving average, and courtesy of last week’s post-earnings rally, shares managed to reconnect with this moving average for the first time since last December.

On Friday, JPM stock attempted another intraday push higher but got rejected at this 200-day moving average, which also matches up with some horizontal lines of resistance (former support).

JPM stock chart daily
Click to Enlarge

Considering the confluence area of technical resistance as well as the aforementioned broader-picture headwinds, active investors and traders could look to leg into calculated short positions or buy cheap puts or put spreads (implied volatility has come down meaningfully of late) using an initial price target near $59.50, while any further rally above the 200-day moving average — particularly for anyone holding on a daily or weekly basis — should serve as a stop-loss signal.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/04/jpmorgan-chase-co-jpm-stock-is-vulnerable/.

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