Big US Banks (JPM, C, RY, BAC) With Nice Charts

Commentary:

Four big name banking stocks have been flying higher recently, all up between 13 and 39% in the last three months. While the upward progress is continuing in two, the other two stocks have paused in a sideways consolidation. Ultimately, the question is whether the uptrend is going to continue? Technical analysis is not always a crystal ball, but by using simple tools you can determine when the trend is strong and when it is not.

 

 
JPMorgan Chase & Co. (NYSE:JPM)
 
 

JPMorgan Chase & Co. (NYSE:JPM) is up 22.06% in the last three months, and as of October 16 continued to forge upward hitting the highest price ($43.11) seen in five months. The uptrend is well defined since the 2012 low of $30.83 in June, and a trend channel signals an area of resistance from $44 to $45. Just beyond this is the 52-week high at $46.49. Created by a trendline in July is support at $40, and a drop below it will likely push the price to the next trendline and support region at $37.30 to $36.40. Traders will look to pick up the stock long on pull-backs that hold above support; dropping below support is a sign a decline may be coming.

SEE: Technical Analysis: Support And Resistance

 

 

Citigroup, Inc. (NYSE:C)
 
 

As of the $37.40 close on October 16, Citigroup, Inc. (NYSE:C) is up 38.94% in the last three months. Volume pushed higher on the October 15 and the next day as well, showing interest in the stock. Resistance is close by at the 52-week high of $38.40. A divergence on the RSI shows that momentum may be dying, making the volume burst look more like a trend finale rather than a sustainable buying boom. If the price moves above the 52-week high, resistance is expected between $40 and $41, with $40 being the price target for those that are long. A drop below $34 is the first sign that the stock may be weakening; moving below $32 will likely result in a further decline.

SEE: Momentum And The Relative Strength Index

 

 

Royal Bank of Canada (NYSE:RY)
 
 

Royal Bank of Canada (NYSE:RY) is up 13.86% over the last three months, as of the October 16 close. Most of the gain came in August and in early September, but the stock has moved sideways since then. The 52-week high is at $59.60 and is at the closest pivotal level, with a rise above it indicating a breakout of the current range and a continuation of the uptrend. Divergence on the RSI over the last two months, warns that an upside breakout may not occur, and if it does it might not last. Support is at $56.50, and if the price drops below it there is little support until $54 to $53 where the trendline which began in June intersects.

SEE: The Anatomy Of Trading Breakouts

 

 

Bank of America Corporation (NYSE:BAC)
 
 

The stock of Bank of America Corporation (NYSE:BAC) has also been moving more sideways since creating a swing high at $9.79 in mid-September. If the price rallies above that high, it is a positive sign giving a target of $10.75. The 52-week high is at $10.10, a key level to watch if the upside breakout occurs. Support is provided by the short-term range at $8.70. A downside breakout gives a target of $7.75, but could go lower as key support is not until the $7 area.

 

 
Bottom Line:

Price movement is the ultimate tool, as it is unwise to fight a trend. These banking stocks have been pushing higher for the last three months, and may continue to surge. Dropping through the support areas warns that the trend may be weakening. However, if the price pulls back toward support without breaking through it, such occurrences are often buying opportunities. Trends and trend channels provide levels to buy or sell, and an RSI indicator can help determine the strength of a trend, but its signals should not be acted on in isolation.

 
Charts courtesy of stockcharts.com

At the time of writing, Cory Mitchell did not own shares in any of the companies mentioned in this article.

 

JP Morgan (JPM): Try to Break the Neckline for 2nd Time!

JP Morgan (JPM) bounced back from 50D MA resistance and also 23.6% Fibonacci Retracement Resistance at $40.3 and punched through the neckline at $37.70 yesterday.  Need to monitor whether this selling momentum is str0ng enough to confirm the Double Tops. I believe other traders are watching this level closely and prepared to short sell when this double tops is confirmed.

JP Morgan Chase (JPM) – Double Tops!!

JPM is forming at Double Tops and currently just sitting on the neckline at $37.70. Base on the chart, there is a very high chance for a breakout of this Double Tops chart pattern due to the following observation:

  • JPM is unable to break the 20D MA resistance (shaded in red) and bounces down.
  • 50D MA is crossing down 200D MA.
  • Stock price is hooking on the lower Bollinger Band
  • MACD is going to show Bearish Convergence
  • Parabolic SAR is going to reverse.
  • RSI and Stochastic are reversing and turning down.

Plus fundemantally, all the negative news in Euro zone debt crisis and no clear signs that the crisis can be resolved in near term. Besides the PIIGS, now Hungary is coming into picture! I feel this crisis is even worse than than US financial crisis because Euro zone cannot print money to save those countries.

The breakout target price is $27.70 which is close to the 61.8% Fibonacci Retracement Level. I find no reason not to short JPM by buying a PUT option base on the current analysis. In addition, the implied volatility (IV) is low that make the option not so expensive. Any contrarion out that have a bullish view?