Might JPMorgan Shares Break Down After Report? The Charts Hold Clues

JPMorgan stock popped after the earnings report, then pulled back. Here's how to trade the stock from here.
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Shares of JPMorgan  (JPM) - Get Report rallied as much as 3.8% after the banking giant reported its first-quarter earnings, then pulled back.

At last check the shares were off 4% at $94.26 in a sharply higher broad market.

JPMorgan, Wells Fargo  (WFC) - Get Report and Johnson & Johnson  (JNJ) - Get Report kicked off this quarter’s earnings season, as investors now face a tough situation. 

The S&P 500 has retraced just over half its losses since the start of the coronavirus selloff. Earnings could either accelerate that recovery or undo a bulk of the gains.

For JPMorgan, the company reported a top- and bottom-line miss. Revenue of $28.25 billion shrank 3% from a year earlier and missed estimates by $1.2 billion. 

Earnings of 78 cents a share took a hit as the company boosted its reserves up to $8.29 billion. That’s up from just $1.5 billion last year and compares with the $8.6 billion it held at the end of first-quarter 2009, amid the great recession.

As investors digest the quarter, let’s look at a few key levels on the chart.

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Trading JPMorgan Stock

Weekly chart of JPMorgan stock. 

Weekly chart of JPMorgan stock. 

My fear with the banks was a rally that reverses lower. There’s still plenty of time left in the week, but so far that post-earnings reaction is playing out in JPMorgan stock.

The $103-to-$105 area was initial support after two straight down weeks in late February, but the reprieve didn’t last long. After breaking as support, this area has now rejected the stock several times, continuing to act as resistance.

It doesn’t help that at least for the moment JPMorgan stock is failing to hold the 38.2% retracement near $100. And commanding even more attention is the 200-week moving average at $96.33. Bulls want to see shares this mark hold or risk a further decline.

With JPMorgan often considered a best-in-breed bank and an industry leader, its post-earnings reversal is not very inspiring. That's particularly so with Wells Fargo  (WFC) - Get Report declining on Tuesday morning and with more banks set to report later this week.

If the stock can hold its 200-week moving average, see that it reclaims the 38.2% retracement and $100 level. Above that and $105 is the next hurdle.

Below these levels puts the 23.6% retracement near $91 in play, with $87 being the next notable level. This mark has been both support and resistance over the years and losing it will really damp sentiment. 

While a pullback will hurt investors, the silver lining is that it gives the stock an opportunity to put in a higher low and to become more constructive over time. 

Taking out the low puts that thesis to bed, though. For now, continue to go level to level in JPMorgan stock.