Can JPMorgan Chase Stay in the Lead?

With shares of JPMorgan Chase (NYSE:JPM) trading around $48, 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 global financial services firm and a banking institution. The company is engaged in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing, asset management and private equity. JPMorgan Chase’s presence in an industry that is the backbone of the economy makes it one of the most sought after institutions. As long as there are economies and businesses to be supported, JPMorgan Chase stands to see consistent profits.

T = Technicals on the Stock Chart are Mixed

Over the last ten years or so, JPMorgan Chase has been struggling to break above a key $50 price level. The stock is currently trading at the upper end of a multi-year range, a break higher may be very positive for the stock price. 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 around its rising key averages which signal neutral to bullish price action in the near-term.

JPM

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(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

22.46%

10%

15%

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

Put IV Skew

Call IV Skew

May Options

Average

Average

June Options

Average

Average

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As of today, there is an average demand from call and put buyers or sellers, all neutral over the next two months. To summarize, investors are buying a minimal amount of call and put option contracts and are leaning neutral 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 Increasing 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?

2013 Q1

2012 Q4

2012 Q3

2012 Q2

Earnings Growth (Y-O-Y)

33.61%

53.85%

37.25%

-4.72%

Revenue Growth (Y-O-Y)

-5.05%

7.26%

2.55%

-17.82%

Earnings Reaction

-0.61%

1.01%

-1.14%

5.96%

JPMorgan Chase has generally seen increasing earnings and revenue over the last four quarters. From these figures, the markets have had mixed feelings about JPMorgan Chase’s last four 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

8.73%

0.37%

11.03%

5.91%

8.86%

JPMorgan Chase has been an average performer relative to its peers and sector, year-to-date.

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Conclusion

JPMorgan Chase provides services in an industry that is the backbone to world economies. The stock has done well but has a very difficult time getting above $50 per share. Currently, JPMorgan Chase stock is trading near the upper end of a multi-year range, a break higher can be very positive. However, earnings and revenue figures have sent mixed vibes to investors. Relative to its peers and sector, the stock has been an average year-to-date performer. WAIT AND SEE what JPMorgan Chase does this quarter.

Using a solid investing framework such as this can help improve your stock-picking skills. Don’t waste another minute — click here and get our CHEAT SHEET stock picks now.

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