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JPMorgan Chase Stock Reverses, Could Drop Another 11%

InvestorPlace logo InvestorPlace 4/13/2017 Anthony Mirhaydari
People stand inside the lobby of the JPMorgan Chase & Co. headquarters building in New York. © Ron Antonelli/Bloomberg/Getty Images People stand inside the lobby of the JPMorgan Chase & Co. headquarters building in New York.

Shares of Wall Street titan JPMorgan Chase & Co. (JPM) are being unceremoniously dumped by investors on Thursday despite reporting better-than-expected quarterly results. After an initial early session surge to test resistance at the 20-day moving average, JPM stock has reversed lower and is in risk of breaking out of a three-month support range.

If it does that, it would hit lows not seen since January.

JPM stock chart view 1© Provided by InvestorPlace JPM stock chart view 1

JPM is falling further away from its 50-day moving average, marking the most significant pullback for the stock since early 2016. And it sets up a possible test of the 200-day MA, not touched since last summer, which would be worth a near 11% decline from here.

First, the good news: JPMorgan reported earnings of $1.65 per share on revenues $25.6 billion vs. estimates of $1.51 and $24.6 billion respectively.

Now, the bad news: Average core loans increased 9% over last year, missing estimates for 10% growth and fueling economy-wide concerns about slowing loan demand. As investors actually dug into the results from JPM’s competitors, more bad news emerged: Negatives like surging credit card charge-offs, lower mortgage originations, and tighter net interest margins.

In fact, Wells Fargo & Co. (WFC) reported mortgage applications fell by 23% quarter-over-quarter to just $59 billion, below the nadir hit in 2014 to return to financial crisis lows. It also reported auto lending down $1.9 billion, personal loans and credit lines down $539 million, credit cards down $2 billion, and first mortgage loans down nearly a billion.

You’ll be unsurprised to learn that WFC stock is off by a couple percentage points today.

Edge Pro subscribers are preparing for further downside extension in bank stocks generally and JPM specifically with a new position in the April $84.50 JPM puts, which are trading near 60 cents.

Anthony Mirhaydari is founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.

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