Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free weekly newsletter.
Banks have underperformed the market for the better part of this year, and given the current short-term oversold state in the broader U.S.equity markets, the banks could offer us a chance at a quick buck here. In the chart below of the SPDR S&P 500 (NYSE:SPY) versus the Financial Select Sector SPDR (NYSE:XLF) dating back to April, note the blue line (financials) underperforming the S&P 500.
The long-term resistance level of JPMorgan Chase & Company (NYSE:JPM) near $48 dates back to 2007. So far in 2011, the stock had twice tried to pierce the $48 level, once in February and once in April.
On the daily chart looking back to summer 2010, we note support around $35.50, which JPM broke through on a closing basis on Monday, Aug. 8, but again closed above yesterday, and that’s a bullish sign.
Taking a closer look at the daily chart dating back to early June, note the oversold slow stochastics oscillator. Further, note yesterday’s retest of Monday’s lows and how the stock left a long tail on yesterday’s candle.
A follow-through up day here would be preferable before going long for a trade, but given the recent crazy volatility waiting for an up day might erase the entire opportunity to the long side.
The trade I see setting up here is quick as that’s the environment we find ourselves in – buy-and-hold strategies might find better value still a few months out. Buying near $36.40 with a stop at yesterday’s lows (remember increased volatility calls for somewhat wider stops) with a profit target as high as $40 smells like a good setup here.
- See Sam Collins’ Daily Market Outlook: Was Yesterday’s Low Really the Bottom?
- See Serge Berger’s Daily Market Outlook: One More Shot to Play the Bounce?
- See Sam Collins’ Trade of the Day: Citi is a High-Risk Bottom-Fisher’s Dream
