Is This the 1 Big Bank Stock to Add to Your Portfolio?

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With shares of JP Morgan (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:

C = Catalyst for a Stock’s Movement

JP Morgan Chase & Co (NYSE:JPM) is portrayed as one of the few good big banks out there, and we know they are few and far between. The great reputation that JP Morgan has is working well for them in an industry that was disliked but is now picking up its feet. Look for JP Morgan to lead the pack in a recovering financial industry.

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T = Technicals on the Stock Chart are Strong

JP Morgan’s daily price chart looks better than most big banks over the multi-year time frame. In fact, it is one of the few currently trading near pre-crisis levels. The stock just broke out to thee-year highs and looks to be ready to take out the 2007 highs. The price trend over the last few years has been that of orderly higher highs and higher lows, minus the last year’s mishap. JP Morgan shares have since made up lost ground and then some. Judging from the price trend, the stock looks to have higher prices in sight.

Evaluating trends can be made simple with the use of moving averages. What are the key daily averages doing? In the context of a strong uptrend, a stock’s price should be above that of key simple moving averages. What are the key moving averages? The 50-day, 100-day, and 200-day. Trading above the 20-day moving average is an extra. Today, JP Morgan stock is trading above its 20-day, 50-day, 100-day, and 200-day simple moving averages. Also, the moving averages are upward sloping and stacked in a consecutive order. What more can one ask for when analyzing moving averages of a price chart? Price action and the moving averages confirm a powerful uptrend.

What is the options market telling us about investor sentiment? The implied volatility of JP Morgan options is at 25.13 today, which coincides with a 96th percentile over the last 30 trading days. The pattern has been similar among many stocks today, implied volatility is high due to the fact that many investors have been expecting a pullback in the overall markets. We’ve had two consecutive days of declining prices as well as rising implied volatility levels. So…

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