Can JPMorgan Chase Break Higher?

With shares of JPMorgan Chase & Co. (NYSE:JPM) trading around $55, is JPM an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

JPMorgan Chase is a financial holding company that provides various financial services worldwide. The company is engaged in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing, asset management, and private equity. Financial services companies like JPMorgan Chase are essential for well-functioning economies around the world.

Julian Knott, an executive director of JPMorgan Chase’s global technology network, fatally shot his wife before committing suicide, police said. The bodies of Knott, 45, and his wife Alita, 47, were found July 6 in their home in Jefferson Township, New Jersey, police said in a July 8 statement. He shot her repeatedly, then took his life with the same gun, police said. Knott started at JPMorgan in 2006 as a network operations manager in London and rose to executive director of the technology network over eight years, according to his LinkedIn profile. He met Alita in the UK, and they moved to Ohio and then New Jersey as Knott gained responsibility, the Star-Ledger reported, citing a biography from her job as a Coldwell Banker sales associate. Knott was promoted in January to executive director at JPMorgan’s Global Network Operations Center in Whippany, New Jersey.

Patricia Wexler, a spokeswoman for the New York-based bank, declined to comment. He was “calm, intelligent, friendly, hardworking,” said Steve Dunk, a vice president at JPMorgan. “Julian’s and Alita’s deaths were a tragic, incomprehensible event and they leave behind many, many grieving friends.” The Knotts are survived by three children, according to the Star-Ledger. Alita shared photographs and video on her public Facebook page of the family on a snowboarding trip, dog-sledding in Colorado and driving off-road in a Hummer in North Carolina.

T = Technicals on the Stock Chart Are Mixed

JPMorgan Chase stock has struggled to make significant progress. However, the stock is currently surging higher and looks poised to continue. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, JPMorgan Chase is trading below its rising key averages which signal neutral to bearish price action in the near-term.

JPM(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of JPMorgan Chase options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

JPMorgan Chase Options

20.00%

73%

70%

What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

August Options

Steep

Average

September Options

Steep

Average

As of today, there is an average demand from call buyers or sellers and high demand by put buyers or low demand by put sellers, all neutral to bearish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bearish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Decreasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on JPMorgan Chase’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for JPMorgan Chase look like and more importantly, how did the markets like these numbers?

2014 Q1

2013 Q4

2013 Q3

2013 Q2

Earnings Growth (Y-O-Y)

-19.5%

-6.47%

-112.14%

32.23%

Revenue Growth (Y-O-Y)

-19.22%

-7.02%

-7.67%

13.67%

Earnings Reaction

-3.65%

0.06%

-0.01%

-0.3%

JPMorgan Chase has seen decreasing earnings and revenue figures over the last four quarters. From these numbers, the markets have been pleased with JPMorgan Chase’s recent earnings announcements.

P = Average Relative Performance Versus Peers and Sector

How has JPMorgan Chase stock done relative to its peers, Bank of America (NYSE:BAC), Citigroup (NYSE:C), Wells Fargo (NYSE:WFC), and sector?

JPMorgan Chase

Bank of America

Citigroup

Wells Fargo

Sector

Year-to-Date Return

-4.99%

-0.83%

-10.00%

14.11%

-1.42%

JPMorgan Chase has been an average performer, year-to-date.

Conclusion

JPMorgan Chase is a bellwether in the banking space that forms an essential part of the United States financial system. Julian Knott, an executive director of JPMorgan Chase’s global technology network, fatally shot his wife before committing suicide, police said. The stock has struggled to make significant progress, but is currently surging higher. Over the last four quarters, earnings and revenues have been decreasing. However, investors have been pleased with recent earnings announcements. Relative to its peers and sector, JPMorgan Chase has been an average year-to-date performer. WAIT AND SEE what JPMorgan Chase does this quarter.

Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

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