Many bank stocks gained ground for the first time in six sessions on Thursday, to take a well-deserved break of relative weakness that has infected the sector from JPMorgan Chase & Co. (JPM) reported first quarter earnings in mid-April. The banking fund is back down to the level that is displayed just three days after the March lows, generating a bearish divergence with the S&P 500 Index, which is now trading close to two months.
JPMorgan CEO Jamie Dimon and Morgan Stanley (MS) ceo James Gorman have both said they do not expect a ‘ V ‘ shaped recovery in spite of the reopening of the business today that took place across the united States. Lower interest rates have hurt the prospects of profits so, the reduction of margins that develop during periods of rising interest rates. Many banks have also been forced to increase reserves due to expected credit losses that seem inevitable in the next phases of the pandemic.
Even the oil crash has affected banks, with heavy energy-sector loan exposure that will generate the default settings if the crude oil contract did not increase. Taken in total, the sector headwinds are likely to persist through the rest of the year 2020, to keep a lid on the banking group even if the economy stabilizes and most people return to work. In the meantime, stocks remain vulnerable to the result of the sale of the pressure that may test and even break the March lows.
The SPDR S&P Bank ETF (KBE) rallied three-year basing pattern in the fourth quarter of 2016, entering in a modest upward trend, which has stalled at $52 in February of 2018. It is sold in a two-year low in December and turned over in 2019, lifting in the middle of$40 in February. In November, a breakout made limited progress before retreating to $48.17 in December, before a downtick, which is amplified in February 2020, at which time the virus began to spread rapidly around the world.
The decline found support at a seven-year low in the bottom of $20, opening the way to a bear flag pattern which has published three peaks in 50 days exponential moving average (EMA) resistance above $30. The funds reversed to the barrier, on the 30th of April, down to the flag support at the Wednesday session. It has now compressed between the resistance to the moving average and the support trend line, signaling a mixed technique state that the risk of performance has a tendency to move in the next two weeks.
JPMorgan Chase stock broke out in November 2016 and, lifting two-strong rebound of the wave of $119 in March 2018. The stock relatively well in the fourth quarter sell-off, dropping to 14-month low before a rebound that has completed a round-trip in the prior high in September 2019. In October, a breakthrough has caught fire, posting an all-time high at $141 in January 2020, before a decline which has accelerated in a vertical drop in February.
The sell-off set to its lowest since three years in the mid – $70, on 19 March, while the subsequent bounce stalled at the 50-day EMA near $104 on 9 April. Unlike the KBE fund, JPMorgan stock has not posted its highest since this time, instead of grinding sideways in narrow range-bound action between the high and the upper part of $80. The Accumulation of readings have dropped to near lows of March during this period, increasing the chances that prices will soon follow.
Bank of America Corporation (BAC) shares broke out above eight years of resistance to almost 20 years after the election of 2016, the two legs of the uptrend that has stalled in the middle of$30 in March 2018. The stock sold at 15-month low in December and has rebounded sharply, the return to a trend line of lower highs in October. Immediately breakout posted health the purchase of the interest in December of 11-year high of $35.72, before a slight decline eased in a vertical path during the pandemic of panic.
Like JPMorgan, Bank of America has reached its lowest level in over a three-year low in March and turned over, carving a modest recovery wave that has stalled at the 50-day EMA resistance, the 9th of April. A 29 April breakout attempt has failed, leaving room for five down days in a row, before the Thursday, 49-cent bounce. The Buildup has also fallen almost depressed March levels, increasing the odds that this park will test and potentially break the low in the next few weeks.
The Bottom Line
The bank stocks are under-performing wide reference points, setting off the bearish divergences that could spread into other areas during the months of May and June.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.