JPMorgan Remains Near Its Highs, but Momentum Is Fading

NEW YORK (TheStreet) -- JPMorgan Chase  (JPM) may soon enter a pullback phase. The powerful bull run that began in late April is beginning to show signs of exhaustion.

There may be a bit more upside left in the 12-week rally that has already carried the shares 16% higher, but a healthy consolidation will be needed soon. A retest of the May high at $67.20 would relieve some of the pressure and offer patient bulls an entry opportunity.

During JPMorgan's current rally phase, the stock has remained in an orderly bull channel. The run has included a steady string of higher monthly highs as well as higher monthly lows, an encouraging sign for investors. Despite the impressive move, JPMorgan did not return to overbought status, as per its moving average convergence/divergence indicator, until late last month. As the stock began to pierce the $67 area, its MACD reading hit a high not seen since November 2013. JPM continued to drift higher, but a loss of momentum has been evident.

It would take quite a bit of damage to unravel the current bull trend. That's unlikely in the near term. A healthy pullback, though, would reinvigorate the rally. This initial layer of support rests near the $67 area. If the lower band of JPMorgan's bull channel is convincingly broken, along with an acceleration in volume, a deeper fade is likely. Although a continued rise above current highs at $68.70 may be difficult, a steep pullback is also unlikely.

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At the time of publication, Morrow was long JPM.

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