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Michael Fowlkes' Analyst Insights


InvestorsObserver
Options and ETF Analyst Writer
Michael Fowlkes
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JP Morgan Chase kicks off earnings season with Q4 results

Michael Fowlkes

1/12/2019 12:54 PM

What's Happening

Banking giant JP Morgan Chase (JPM) will kick off the new earnings season with its fourth-quarter report on January 15. The company will report before the market open with the consensus calling for earnings of $2.20 per share. During the same period last year the company earned $1.76 during the same period last year and the stock is down 5.5% since the end of June.

Technical Analysis

JPM was recently trading at $99.67 down $19.66 from its 12-month high and $8.56 above its 12-month low. InvestorsObserver’s Stock Score Report gives JPM a 55 long-term technical score and a 42 short-term technical score. The stock has recent support above $91 and recent resistance below $102. Of the 15 analysts who cover the stock 7 rate it Strong Buy, 1 rate it Buy, 7 rate it Hold, 0 rate it Sell, and 0 rate it Strong Sell, JPM gets a score of 54 from InvestorsObserver’s Stock Score Report.

Analyst's Thoughts

JP Morgan and its biggest rival Wells Fargo will get the earnings season under way with their quarterly reports. With so much concern over a possible looming recession the bank stocks will be of particular interest to Wall Street and their quarterly results will have a ripple effect across the entire market. Bank stocks thrived as interest rates started to rise, but investors have become increasingly concerned over the state of the housing market, and international economies feeling the pinch of the trade wars the U.S. is waging against a flurry of nations, most notably China. JPM hit bottom in late December and has started to erase some of its recent losses, but for the stock to really build on its current momentum not only will JP Morgan need to show strong numbers, but traders will look for strength in all the major financials that report early in the season. The street is expecting a small earnings beat with a whisper number of $2.22 for the quarter, so traders will want to see at least that number and positive reports from Wells Fargo, Citigroup, Bank of America, U.S. Bancorp and Goldman Sachs… all of which also report this week. The stock is trading at 10 times future earnings and analysts have an average price target of $119.69 on the stock.

Stock Only Trade

If you're looking to establish a long stock position in JPM consider buying the stock under $100. Sell if it falls below $92.50 or take profits if it gets to $115.

Bullish Trade

If you want a bullish hedged trade on the stock, consider a 3/15/19 85/90 bull-put credit spread for a $0.50 credit. That's a potential 11.1% return (64.4% annualized*) and the stock would have to fall 10.5% to cause a problem.

Bearish Trade

If you want to take a bearish stance on the stock at this time, consider an 3/15/19 110/115 bear-call credit spread for a $0.45 credit. That's a potential 9.9% return (57.3% annualized*) and the stock would have to rise 10.5% to cause a problem.

Covered Call Trade

If you like the stock but wish to lower your cost basis on a new position, you may want to consider a 3/15/19 $100 covered call. Buy JPM shares (typically 100 shares, scale as appropriate), while selling the 3/15/19 $100 call for a debit of $95.74, per share. The trade has a target assigned return of 4.4%, and a target annualized return of 25.8% (for comparison purposes only).

 

 

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