I added to my long position in JPMorgan Chase (JPM)  when the stock, and other big banks, sold off Tuesday.

However, the reasons that I bought Action Alerts PLUS holding JPMorgan have nothing to do with its low forward-looking valuation, the coming CCAR (Comprehensive Capital Analysis and Review) stress test results or the easing of banking regulations.

Here's why I was buying.

Technical support should have, and did at least for the day show up as the stock approached:

  1. A 38.2% Fibonacci re-tracement of the June through February move higher.
  2. The 200-day simple moving average.
  3. The central trend line provided by an Andrews' Pitchfork model beginning with that same February high.
  4. JPM has shown remarkable resiliency every time that Relative Strength has even come close to 30.
  5. Chaikin Money Flow has finally turned green after two months in the red.

My Plan

Is it too late to get in on this trade? I don't think so. Obviously, entry as close to the 200-day simple moving average (SMA) as possible would be more desirable, but my price target for the shares that I tacked on Tuesday would be $111 with a two-week timeline. My larger position is longer term. My target for those is the $119 year-to-date highs.

I am already short June 15 $100 puts, which is obviously where I add more shares if need be. Those still paid $0.45 as of last night. My point of capitulation would be the $98 level as that would represent a break of the 50% Fib line. Should that happen, I would like to buy back the shares at $90 in a worst-case scenario. I am already short those puts with a January expiration, and those puts still pay $2.45.

At the time of publication, Guilfoyle was long JPM equity; short JPM put options.

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