Sector diversification typically makes a good deal of sense. But when it comes to financial giants JPMorgan Chase (NYSE:JPM) and Bank of America (NYSE:BAC), on and off the price chart JPM stock is a buy and BAC stock is where you go to buy a Certificate of Deposit. Let me explain.
Buying a couple, or even a few, names within an area such as technology to reduce portfolio risk can make a great deal of sense. There is, of course, a big difference between owning a company like Apple (NASDAQ:AAPL) and having exposure in another tech outfit such as Microsoft (NASDAQ:MSFT).
But for bank stocks like JPMorgan and Bank of America, there’s simply too much redundancy to believe the power of diversification is a truly attractive strategy. In general, JPM and BAC stock will travel more or less in the same direction depending on various macro influences impacting the country’s first and second largest banks.
This view also means going long JPM stock and shorting BAC shares, without solid company-specific cause and similar to what we’ve seen the past couple years in Wells Fargo (NYSE:WFC) or Deutsche Bank (NYSE:DB) probably isn’t going to yield much as an investment play either.
And when it comes to the price lines that investors use to gauge one company against another, in today’s market JPM stock is a buy, while Bank of America is only good for locking in less bang for the buck.
Bank Stock Buy: JPM Stock
Off the price chart, JPM stock, the country’s largest bank by assets, continues to make all the right moves. In early April, the company easily topped profit and sales views. JPMorgan’s report also offered investors broad-based growth in numerous units ranging from its loan portfolio business, credit card sales and advisory revenue to debt underwriting and surging investment banking sales, which hit all-time-highs.
On the price chart, JPM stock is firing on all cylinders — or as well as can be expected given the recent market hostilities tied to escalating tensions between the U.S. and China.
The weekly chart shows that by the end of April, after two separate corrective phases since early 2018, JPM stock had narrowly notched a higher all-time-high. The chart also shows during this past month’s broad-based pullback that JPMorgan has put together a constructive higher low pivot to confirm the banker’s uptrend.
With the weekly candle pivot low receiving modest trade-through confirmation to the upside on Tuesday and JPM’s stochastics beginning to turn higher in neutral territory, an investment in JPM stock looks good. But it looks even better on the daily chart.
Tuesday’s weekly confirmation also managed to reverse JPM stock’s breach of its 200-day simple moving average. Given the well-watched technical level also lines up nicely with a price fill of JPM’s earnings-driven price gap and test of the 38% retracement level—it’s time to invest in this best of breed stock today.
Bank Stock Hold: BAC Stock
Off the price chart BAC stock, the United States’ second-biggest bank, delivered mixed results in its quarterly confessional back in mid-April. Bank of America managed to top and grow profit estimates by a slight margin, but sales narrowly missed views while also dropping from the
And on the price chart, unlike JPM stock, the big picture is also a mixed bag for BAC stock investors.
I like the weekly BAC stock chart for its Bollinger Band support, oversold stochastics and test of the 50% Fibonacci level. But I think we can all agree, along with the lower high pattern, BAC stock’s price action is weaker and definitely earns it the number two spot here as well.
BAC stock’s daily price chart also paints a more precarious picture. Unlike JPM stock, we can see that while shares managed to score a new high for 2019, by the end of April, BAC is well beneath its earnings levels and in a testing position of 200-day simple moving average resistance.
Regardless of what the Fed says later this month or what happens with the trade war, BAC stock doesn’t look strong enough on its own merit to buy shares right now.
Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. . For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.