Stocks have largely chopped back and forth in recent weeks and months, frustrating the chart-chasing crowd in hopes of major new rallies or market collapses. While seemingly every day we are getting a new political, geopolitical or financial headline that contradicts the prior day’s news, what fund managers are focused on now is earnings season. JPMorgan Chase & Co. (NYSE:JPM) will be one of the first companies to report this Friday … and it is an important one. In today’s analysis below I evaluate where JPM stock could be a good reward to risk buy again following any post-earnings weakness…if and when.
As I state at the beginning of each earnings season to our clubhouse subscribers, direct clients as well as in this here column, the best trading opportunities during any earnings season set up after any given company has reported earnings. This is to say that taking positions ahead of and through an earnings report in hopes of a specific immediate term outcome is gambling at best.
With that in mind let’s look at the charts of JPM stock and see what levels we can map out where trades following the earnings report could be placed.
JPM Stock Charts
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
First up is the big picture multiyear weekly chart. Here we see that in late 2016, JPM stock not only broke past important horizontal support as marked by the blue box, but also began to steepen its incline as it broke out of an already steady up-trend. By early 2018 this trend became exhausted and the stock stopped going higher along with the broader market.
From a momentum perspective as per the MACD oscillator at the bottom of the chart, JPM stock remains notably overbought in this time frame and thus arguably still in need of more consolidation if not outright mean-reversion lower.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
On the daily chart, we see that since JPM stock failed to make sustainable higher highs in early February, it has also traced out a notable head-and-shoulders pattern. This pattern which is marked by the failed higher highs and then lower highs in March typically resolves to the downside.
The $105-$106 area is particularly important for this stock as it coincides with both horizontal support, i.e. the neckline of the head and shoulders pattern, as well as diagonal support by the black diagonal support line.
What would interest me from a trading perspective is to buy JPM stock upon a break below this confluence support area and a move toward the $102 area, which is where the red 200-day moving average currently resides. If and when this happens I would see JPM stock as a good reward-to-risk buy again.
Check out Anthony Mirhaydari’s Daily Market Outlook for April 12.
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