Can JPMorgan Chase See Higher Prices?

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With shares of JPMorgan Chase (NYSE:JPM) trading around $53, 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.

Two former JPMorgan Chase have been criminally charged with covering up trading losses related to the London Whale fiasco. Federal prosecutors have charged the duo with falsifying books and records, conspiracy, fraud, and making false filings with the Securities and Exchange Commission. “This was not a tempest in a teapot, but rather a perfect storm of individual misconduct and inadequate internal controls,” one prosecuting attorney said in an SEC filling.

As companies continue to operate and economies expand, leaders like JPMorgan Chase will provide valuable products and services to help financial transactions run as smoothly as possible. As one of the better big banks, JPMorgan Chase will lead the financial sector for many years.

T = Technicals on the Stock Chart Are Strong

JPMorgan Chase stock has seen a consistent uptrend in recent times. The stock is now trading at prices not seen for more than 10 years. 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 slightly above its rising key averages, which signals neutral to bullish price action in the near term.

JPM

Source: Thinkorswim

Taking a look at the implied volatility 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

20.52%

33%

31%

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

Put IV Skew

Call IV Skew

September Options

Flat

Average

October Options

Flat

Average

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

E = Earnings Are Rising 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 Q2

2013 Q1

2012 Q4

2012 Q3

Earnings Growth (Y-O-Y)

32.23%

33.61%

54.89%

37.25%

Revenue Growth (Y-O-Y)

13.67%

-3.57%

10.16%

5.82%

Earnings Reaction

-0.30%

-0.60%

1.01%

-1.14%

JPMorgan Chase has seen rising earnings and revenue figures over the last four quarters. From these numbers, the markets have not 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), and Wells Fargo (NYSE:WFC) — and sector?

JPMorgan Chase

Bank of America

Citigroup

Wells Fargo

Sector

Year-to-Date Return

21.18%

23.34%

28.54%

25.78%

24.84%

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

Conclusion

JPMorgan Chase is a bellwether in the banking and financial space that forms an essential part of the United States financial system. Two former company’s traders have been criminally charged for covering up losses related to the London Whale incident. The stock has been rising higher in recent years and is now trading near prices not seen for more than 10 years. Over the last four quarters, earnings and revenue figures have been rising, however, investors in the company have not been pleased with JPMorgan Chase’s recent earnings announcements. Relative to its peers and sector, JPMorgan Chase has been an average year-to-date performer. Look for JPMorgan Chase to OUTPERFORM.

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