Shares of financial stocks such as banks and as represented by the financial sector of the S&P 500 have not fared well in recent weeks … much like the broader U.S. stock market. Shares of JP Morgan Chase (NYSE:JPM) have fallen about 13% from the September highs and are now back at the lower end of the 2018 trading range. Active investors and traders looking to buy a stock into year-end may find this an attractive spot to buy some JPM stock.
In trading and investing, it’s all about relative performance (risk-weighted). According to financial theory, capital will always seek the best possible allocation. Looking at the financial sector, it has from peak to trough this year so far fell about 16% and has shown notable relative underperformance. This to me was and continues to be a concern for buying into this sector from a thematic perspective (multi-quarter views).
Although the broader stock market remains shaky and volatile for now, I see a tradeable bottom for a year-end rally not too far out in the future. Through that lens, I am looking for individual stocks and groups of stocks where legging into some long positions has good reward to risk into year-end.
JP Morgan Stock Charts
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
The multiyear weekly chart of JPM stock shows that since 2015 it has trended higher, clearly, yet also endured three meaningful consolidation phased. The longest of them lasted about 16 months (summer 2015 – fall 2016) and the second longest one we still remain within.
To be clear, at some point a consolidation phase such as these on the charts will fail and the stock will begin making lower highs … but for now and into year-end I don’t yet see that to be in the cards for this stock.
Underperforming fund managers at some point in coming weeks (likely) will find an itch to buy/chase stocks higher or risk losing their jobs come January … if they notably under-performed their respective benchmarks.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
Moving on to the daily chart, we see that JPM stock has been trading in a well-defined sideways consolidation range since its February highs. The latest down drift now has the stock once again at the very lower end of said range. Note also that as a result of this sideways trot, the stock’s intermediate term moving averages are now tightly coiled together, which ultimately could provide a band of technical resistance.
The trade here and now is as follows: Buy JPM stock around the $104-$105 area (low end of the trading range) with a first upside target around $112. Any sharp bearish reversal from here and particularly a weekly close below the $104 area would be a stop loss.
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