JP Morgan Is Stuck in a Trading Range

 | Jun 15, 2017 | 9:39 AM EDT
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It has been a couple of months since we last examined the charts and indicators for JP Morgan Chase (JPM) . We concluded at the end of March that "At this point in time, it looks like JPM is having a correction in a bull move. Chart support below $85 is OK, but not big. The other side of support is to consider whether there has been much distribution. It does not look like much selling has gone on in the past few weeks, so I maintain a positive view on JPM. A decline to $83 could mean that JPM declines further to $80."

With the benefit of hindsight, we can see in this chart below that JPM eventually declined to $83 and got near $80 and the rising 200-day moving average line earlier this month. We can now see that a downtrend has evolved over the past four months. The slope of the 50-day moving average is negative and the On-Balance-Volume (OBV) line peaked in March. The weakness in the OBV line tells us that sellers of JPM have been more aggressive with more volume be traded on days when JPM has closed lower, which is a sign that traders and investors are more anxious to sell.

In the bottom panel, we can see that the Moving Average Convergence Divergence (MACD) oscillator crossed to a cover shorts buy signal. The oscillator could move above the zero line for an outright buy or it could fail -- it all depends on the price action in the days ahead.

The weekly chart picture of JPM, below, shows us mixed signals. Prices are above the rising 40-week moving average line after a test of the line at the end of May and the beginning of June. Volume has declined for much of this year and this is a negative, as classical chart watchers want to see volume expand in a bull move.

The weekly OBV line peaked at the end of February and should be graded as neutral. The trend-following MACD oscillator turned lower in early March, signaling a take profits sell signal. The two lines of the oscillator have begun to narrow, but a crossover and a fresh buy signal will depend on the price action in the weeks ahead.

A Point and Figure chart, below, cuts out a lot of price "noise" and can clarify support and resistance areas. In this chart we can see that prices held at $82 and bounced, but a decline to $81 could precipitate a deeper decline to $75. It will take a rally to $90 to strengthen this chart.

Bottom line strategy: JPM could trade sideways for several weeks, bounded by $82 on the downside and $90-$91 on the upside. If prices break below $82, we could see further declines to around $75. A close above $91 could re-ignite the bull.

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