Serge Berger is the head trader and investment strategist for . Sign up for his .
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 of the SPDR S&P 500 (NYSE:) versus the Financial Select Sector SPDR (NYSE:) dating back to April, note the blue line (financials) underperforming the S&P 500.
The long-term resistance level of JPMorgan Chase & Company (NYSE:
) near $48 dates back to 2007. So far in 2011, the stock had twice tried to pierce 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 JPM broke through on a closing basis on Monday, Aug. 8, but again closed above yesterday, and that’s a bullish sign.
Taking a closer look at the daily chart dating back to early June, note the oversold slow stochastics oscillator. Further, note yesterday’s retest 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 as 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 calls for somewhat wider stops) with a profit target as high as $40 smells like a good setup here.
- See Sam Collins’ Daily 蜜桃传媒 Outlook: Was Yesterday’s Low Really the Bottom?
- See Serge Berger’s Daily 蜜桃传媒 Outlook: One More Shot to Play the Bounce?
- See Sam Collins’ Trade of the Day: Citi is a High-Risk Bottom-Fisher’s Dream
