Banks have underperformed the market for the better part of this year and given the current short-term oversold state in the broader U.S. equity markets the banks could offer us a chance at a quick buck here. In the chart below dating back to April note the blue line (financials) underperforming the S&P 500.
The long term resistance level of JPMorgan (NYSE: JPM) near $48 dates back to 2007. So far in 2011 the stock had two tries at piercing the $48 level, once in February and once in April.
On the daily chart looking back to summer 2010 we note support around $35.50, which of JPMorgan (NYSE: JPM) broke through on a closing basis on Monday August 8 but again closed above yesterday…that’s a bullish sign.
Taking a much closer look on the daily chart dating back to early June note the oversold slow stochastics oscillator. Further, note yesterday’s re-test of Monday’s lows and how the stock left a long tail on yesterday’s candle. A follow-through up-day here would be preferable before going long for a trade, but given the recent crazy volatility waiting for an up-day might erase the entire opportunity to the long side. The trade I see setting up here is quick – that’s the environment we find ourselves in – buy and hold strategies might find better value still a few months out. Buying near $36.40, with a stop at yesterday’s lows (remember increased volatility asks for somewhat wider stops) with a profit target as high as $40 smells like a good setup here.