JPMorgan Chase (JPM) Showing Signs Of Being A Roof Leaker

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified JPMorgan Chase ( JPM) as a "roof leaker" (crossing below the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified JPMorgan Chase as such a stock due to the following factors:

  • JPM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $663.5 million.
  • JPM has traded 8.7 million shares today.
  • JPM is trading at 1.98 times the normal volume for the stock at this time of day.
  • JPM crossed below its 200-day simple moving average.

'Roof Leaker' stocks are worth watching because trading stocks that begin to experience a breakdown can lead to potentially massive losses. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock may then be subject to emotional selling from investors that can continue to drive the stock lower. Regardless of the impetus behind the price and volume action, when a stock moves with weakness and volume it can indicate the start of a new, potentially dangerous, trend.

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More details on JPM:

JPMorgan Chase & Co., a financial holding company, provides various financial services worldwide. The company operates through four segments: Consumer & Community Banking, Corporate & Investment Bank, Commercial Banking, and Asset Management. The stock currently has a dividend yield of 2.7%. JPM has a PE ratio of 15.1. Currently there are 18 analysts that rate JPMorgan Chase a buy, 1 analyst rates it a sell, and 3 rate it a hold.

The average volume for JPMorgan Chase has been 14.0 million shares per day over the past 30 days. JPMorgan Chase has a market cap of $223.0 billion and is part of the financial sector and banking industry. The stock has a beta of 1.93 and a short float of 0.9% with 2.82 days to cover. Shares are down 1.4% year-to-date as of the close of trading on Thursday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates JPMorgan Chase as a buy. The company's strengths can be seen in multiple areas, such as its expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 4.6%. Since the same quarter one year prior, revenues slightly dropped by 4.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The gross profit margin for JPMORGAN CHASE & CO is currently very high, coming in at 89.61%. Regardless of JPM's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 22.57% trails the industry average.
  • JPMORGAN CHASE & CO's earnings per share declined by 8.8% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, JPMORGAN CHASE & CO reported lower earnings of $4.32 versus $5.19 in the prior year. This year, the market expects an improvement in earnings ($5.50 versus $4.32).
  • In its most recent trading session, JPM has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The change in net income from the same quarter one year ago has exceeded that of the Commercial Banks industry average, but is less than that of the S&P 500. The net income has decreased by 7.9% when compared to the same quarter one year ago, dropping from $6,496.00 million to $5,985.00 million.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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