Shares of banking giant JPMorgan (JPM) were declining Friday morning as traders found their Q4 revenue numbers disappointing. Let's check out the charts.
In this daily bar chart of JPM, below, we can see that prices have been stalled around the $170-$175 area for several weeks now. Prices gapped lower Friday and are testing/breaking (?) the 200-day moving average line. JPM has recovered from other sharp selloffs over the past year - in June, September and recently in December.
The On-Balance-Volume (OBV) line is the "problem indicator" as it has been in a decline since early June and suggests that sellers of JPM have been more aggressive for the past seven months. The Moving Average Convergence Divergence (MACD) oscillator is above the zero line but crossing now to the downside.
In this weekly Japanese candlestick chart of JPM, below, we can see a more positive picture than the daily bar chart. Prices are in a longer-term uptrend above the rising 40-week moving average line. The chart is not updated until Friday's close so we do not see today's test of the average line.
The weekly OBV line shows a sideways pattern from March and that is way more positive than the daily OBV line. The weekly MACD oscillator has been in a decline for months but has narrowed considerably towards a possible upside crossover. If prices rebound soon we could see a buy signal. If prices continue to sink then a buy signal will elude us.
In this daily Point and Figure chart of JPM, below, we can see a potential downside price target of $135.
In this weekly Point and Figure chart of JPM, below, we see a $133 price target.
Bottom line strategy: Conditioned by a rising market since 2009, some traders feel that a downside gap is a buying opportunity. Other traders see a downside gap as potentially the start of a more serious decline. JPM could go either way so traders should be patient and not rush to a quick decision.
