Dow component JPMorgan Chase & Co. (JPM) kicks off second quarter earnings season Tuesday, with analysts expecting an earnings per share (EPS) of $1.32 in the second quarter of 2020 revenue of $30.23 billion. The stock has fallen more than 16% in the month following the month in April for the first quarter of 2020, with investors walk away after the financial giant missed top and bottom line estimates. JPMorgan reserved stock a little upside in the past two months and is still below April recovery high.
The commercial banking sector declined in the second quarter, held down by falling interest rates and the collapse of the commercial activity. As the transactions ticked higher in the first two months of the quarter, the increase of the COVID-19 cases in over half of American states has put a lid on the growth, the renewal of the fears of a long and deep recession. This sector is highly cyclical, is unlikely to swim against the current if this occurs and could enter a prolonged bear market.
On a positive note, most banks are maintaining dividends after the meeting stress test requirements, giving long-term shareholders of a legitimate reason to stay, despite the contrary winds. On the other side of the coin, the sector has been a favored target of Democratic criticism since 2008, and the choice of Joe Biden as president could be a sign of more strict interpretation of the reform of the rules put in place by Congress in the wake of this scandal.
Wall Street consensus currently, the rate of JPMorgan stock as a “Moderate Buy,” 10 “Buy” and 6 “Hold” recommendations on the basis of this opinion. No analysts are recommending that shareholders sell their positions at this time. Price targets range from a low of $97 to a Street high$ 122, while the stock is now trading just $1 above the bottom of the target. In turn, this position prefers a buy-the-news reaction after the Tuesday of the confessional.
JPMorgan’s Long-Term Chart (1991 – 2020)
The stock posted a multi-year low at a split-adjusted $3.21 in 1991 and turned sharply higher, breaking a new record in 1995. The increase stopped in 1998 during the Asian Contagion and the recovery a year later, peaking at $67.20 in March 2000. That marked the highest for the next 15 years, to the front of a complex decline that reached a low of a seven-year low in 2002. Buyers of income in 2003, but their efforts have failed, with the advantage of snap to close the sale in mid-2004.
In 2006, an escape topped just above the .618 Fibonacci sale retracement level in 2007 before a steep decline that accelerated during the economic collapse of 2008. Selling pressure is over 13 years old, small, only 26 cents below the 2002 low, leaving room for a rebound that landed about seven points below the record level of 2007 to the third quarter of 2009. It took nearly four years to build the barrier, finally yielding a 100% retracement of the 2000 high in 2015.
JPMorgan Short-Term Outlook
The stock has broken the resistance in the time after the election of 2016, posting impressive gains in March 2018, when it topped out, once again, to$ 120. The price action in the fourth quarter of 2019 earned a perfect image of the inverse head and shoulders pattern, which gives an escape which has posted a record high of $141.10 in January 2020. The subsequent fall-failure of the session before coming to a stop to a three-year low in the $70s, while the recovery of the wave in the second quarter has failed to cheer up the broken 50-month exponential moving average (EMA), near the psychological $100 level.
A bounce above the barrier, after that the profit would be the mark of modest technical improvements, but the stock must trade above the April high at $128 to generate more reliable buy signals. Those who seek short-term, the graphs should look at the 200-day EMA at $107 after the release to assess the interest of purchase, if applicable. On the flip side, a decline in the $80 to break the trend line to its lowest level since March, which increases the chances for another test during the first quarter low.
The Bottom Line
JPMorgan stock could trade higher after Tuesday gains, but it must pass through a series of technical hoops to restore growth, the long-term prospects.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.