The financials have been playing the part of the potential silent killer to the monster rally that started almost a year ago to the week. Over the last two weeks, the large cap financials have tumbled, which is starting to cause weakness for the market. The reason behind the draw lower is another migration to technology stocks, but there’s more.
The continued uncertainty around the players at the Federal Open Market Committee (FOMC) as well as what action will be taken on interest rates in 2018 is playing a heavy hand in keeping interest rates in-check. This, along with the tug-of-war around any potential tax overhaul has investors looking at the financials with a higher risk assumption.
Today’s three big stock charts looks at Bank of America Corp (NYSE:BAC), Citigroup Inc (NYSE:C) and JPMorgan Chase & Co. (NYSE:JPM) as three of the stock charts that are currently pulling the financials into a potential short-term bearish outlook.
Bank of America Corp (BAC)
Shares of BAC have tumbled 5% over the last two weeks on the growing uncertainty. The pullback was also fueled by a technically oversold condition on the stock that signaled on Oct. 25.
Support may be in place for the shares from the chart, but trends are indicating that the year-end may be rough for Bank of America shares.
- BAC shares are already trading below the $26.50-price-level, which is significant chart support/resistance. Volume is beginning to build on the move below this level, indicating that the stock is picking-up downside momentum.
- BAC shares will face another technical test next week as the stock is approaching its 50-day moving average. Currently the trendline is at $25.80 and should provide some additional support for Bank of America.
- The Chande Trend Meter for BAC has just moved into neutral territory. This suggests that the stock’s momentum and technical strength has weakened and it is likely to cause the stock to start an acceleration to the downside.
- Our target for another round of technical support for BAC stands at $25.
Citigroup Inc (C)
Another financial that has seen a 5% decline since its earnings report is Citigroup. C stock had moved into a deeply overbought situation that we warned readers about three weeks ago. Now, the resulting selling has put the stock into a position that may trigger another 6% decline before year-end.
- Citigroup shares are sitting directly above the $72.50-level, which represents two key technical support indicators;
- Two consolidation areas that occurred in September and October for C stock.
- C stock’s rising 50-day moving average.
- A third technical key for Citigroup at $72.50 is the lower Bollinger Band that resides just below this price. A break below this will increase selling pressure immediately.
- Currently, the downside target for C shares is $69 based on the intermediate-term technicals.
JPMorgan Chase & Co. (JPM)
After reaping the benefits of a volatility rally in October, JP Morgan Chase shares are now struggling as traders are taking profits and longer-term investors are questioning the fundamental outlook of lower interest rates affecting the company’s bottom line.
The charts show that JPM stock is sitting above two critical “must hold” levels.
- JPM shares are trolling at potential support from the chart at $98. This price served as resistance in October, turning naturally into potential support now as the stock works its way back down.
- Additional support from JPM stock’s 50-day moving average lies at the $96-level. This trendline also coincides with the potential chart support from the consolidation that took place in October.
- A break below both of these levels would act as a catalyst for technical traders to add to the selling pressure with a target of $90. JPM’s 200-day moving average will act as the next level of critical support here.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.