Stalking JPMorgan as a Bad-News Buy

 | Oct 30, 2013 | 7:00 AM EDT  | Comments
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Bad news in JPMorgan (JPM) Yes, I saw that, and I thought about writing about another stock instead ... but I decided to put out the technical work anyway. 

I'm currently stalking JPMorgan for a possible buy entry. What I like about this chart is that price is currently above both the 200- and 50-day simple moving averages. I also like that recently JPM has taken out a couple of prior swing highs that are illustrated on the daily chart below. It took out the Oct. 4 high at $52.68, and it also took out the Sept. 10 high made at $53.93.

When I see a pattern shift like this, I like to look at the next pullback for a possible entry. This is the pullback that I'm looking at. So in the case of bad news, will this be a situation where the news is already discounted into the price? If you see a buy trigger against one of the following zones, I would recommend using a defined-risk options strategy.

I have identified two zones on the daily chart. The first zone comes in at the $51.75-$52.02 area, and it includes a couple of .618 retracements along with a 100% (symmetry) price projection of a prior decline. The second zone includes more 100% projections (also known as measured moves) along with a couple of retracements of the prior swings. As long as price continues to hold above one of these two zones, I will look at taking my buy triggers, and I will define my risk either below the $50.92 area (which is the bottom of zone 2) or below the Sept. 25 swing low made at $50.06.

Besides the price analysis, I'm also seeing some Fibonacci time parameters that are suggesting a possible low. Bottom line, I am still going to look at a defined-risk options strategy against this support decision. The potential upside targets come in at $55.61, $56.57 and $58.80. If $50.06 is taken out, however, I will consider myself wrong on the trade and will exit any long positions at that time.

 

 

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