Buy or Sell JPMorgan Chase? What the Charts Say After 31% Plunge

JPMorgan Chase has fallen more than 30% in the past few weeks. Does that present a buying opportunity or a warning sign? Here's what the charts looks like for the stock.
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JPMorgan Chase  (JPM) - Get Report shares have been crushed and so have the share prices of its peers. With the broad market down on Wednesday, so is JPMorgan, off about 4%.

Investment bank CEOs are headed to the White House on Wednesday as they try to sort out a solution for the recent market developments. That includes a tightening credit market, a plunge in oil prices putting debt-laden oil companies on the brink and as volatility runs rampant in the equity market.

There are obvious concerns about the economy at this point, even though most of the U.S. hasn’t seen much of an impact. With the banks in focus, the Real Money team has selected JPMorgan as its Stock of the Day.

Shares of JPMorgan are down about 31% from the highs. That’s on the better end of things, with only Goldman Sachs  (GS) - Get Report doing better, down 28.5% from its highs. Morgan Stanley  (MS) - Get Report, Bank of America  (BAC) - Get Report, Wells Fargo  (WFC) - Get Report and Citigroup  (C) - Get Report are all down between 33% and 38%.

JPMorgan, Citigroup and Goldman Sachs are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells JPM, C or GS? Learn more now.

Trading JPMorgan Chase

Weekly chart of JPMorgan stock.

Weekly chart of JPMorgan stock.

Above is a 30-month weekly chart of JPMorgan stock, which shows just how stunning this drop has been. A few week ago, shares were trading at $137.50. Now they’re down $40, at $97.50.

JPMorgan knifed right through the 50-week and 100-week moving averages, as well as its breakout point near $118. Earlier this week, shares also broke below the 200-week moving average, but have since recovered that mark as of Wednesday.

This will be an important couple of days as far as this week’s chart action goes. If JPMorgan stock can continue higher, bulls will want to see it reclaim the $100 mark. Further, if the stock can rally, traders will have a downside mark to measure against, with Monday’s low sitting at $93.

If JPM shares can reclaim $100, investors will look for the stock to fill the gap up toward $108, with the 100-week moving average at $111 in play above that. If shares move lower and lose the 200-day moving average, the week’s low is in play. Below that and $90 is possible.

For its valuation, yield and high-quality, JPMorgan is certainly starting to garner some attention. Long-term investors could do worse than nibbling on the stock in the mid-$90s, but the technicals do still suggest using some caution. 

Those who buy small now can always add on a further decline if that fits into their long-term approach. At least on a rebound they will have a position, even if it’s small. Those who want to avoid notable losses can keep an eye on the recent low and use it to set their stop-loss.