JPMorgan is getting ready for recession

15 july 2022 56
Volkov_Anton
Volkov_Anton

Listed among the best MarketCheese authors
1st in the segment "Currencies"
2nd in the segments "Indices", "US stocks" and "Metals"
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The second-quarter reports season for U.S. companies has began. As usual, the largest banks are the first to announce their results. Yesterday, JPMorgan stepped up to the plate first to report earnings, leaving behind other banks, and this report didn't seem optimistic to investors – shares fell by 3%. At the same time, the drawdown exceeded 5% during the trading session. Despite the leading managers and Fed officials' assurances that the U.S. economy is strong, the real actions of the largest corporations indicate the opposite - they are actively getting ready for a recession.

 

JPMorgan revenue decreased by 2% to $30.72 billion this quarter (missing the $31.82 billion expected). Net income declined 27% to $8.6 billion (versus the $9.15 billion expected). At the same time, $1.1 billion of net income was allocated in reserves for credit losses, this was the reason why the company stopped its shares buyback program. Considering risk reduction, directing funds to reserves seems more reasonable than conducting the shares buyback program, but it is a clear signal for traders to weaken the demand for the JPMorgan shares.

 

JPMorgan stock price has updated the minimum of the fall of 2020 after the release of the quarterly earnings report. However, the large gap formed on November 6 and 9, 2020 at the level of 104.8 wasn't closed. This level will now attract attention of the “bears”, only 1.2% was left to reach this level at yesterday's lows. The RSI indicator is still far from the oversold zone, which makes it possible for a price to dive deeper.

 

Special attention should be paid to the fact that a “doji” candle, indicating the uncertainty about the short-term price movement, was formed on the chart yesterday. You can open a position at the current price or wait until it attempts to bounce up to yesterday's gap of 110.3, expecting a new wave of decline from this level.

 

 

The following trading strategy options can be suggested:

 

1) Sell JPMorgan at the current price. Take profit – 104,8. Stop loss – 110,3.

 

2) Sell JPMorgan when it bounces up (not above the level of 110,3). Take profit – 104,8. Stop loss – 115,6.

 

Traders can also use Trailing stop instead of a fixed Stop-loss at their disposal.

Volkov_Anton
Volkov_Anton

Listed among the best MarketCheese authors
1st in the segment "Currencies"
2nd in the segments "Indices", "US stocks" and "Metals"
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