Skip to main content

Some Bearish Strategies to Consider for JPMorgan Chase

And if you are long the banking giant, it's time to protect profits and ratchet up stops on current positions.
Comments

JPMorgan Chase & Co. (JPM) is moving into a key resistance decision at current levels. I'm not saying that this stock cannot go higher, but it is time to look at a couple things here with JPM, which is a holding of Jim Cramer's Action Alerts PLUS charitable trust.

If you are long this name, I would protect profits and ratchet up stops on current positions. Also, if your trading/investment plan says it's OK to consider the short side via options, I would look at that with some very specific risk parameters.

My analysis of JPM is focused on the daily chart.

Image placeholder title

JPMorgan Chase & Co. (JPM)

View Chart »View in New Window »

My reasons for anticipating a possible failure in JPM comes from key time and price parameters. The price resistance comes from the confluence of Fibonacci retracements, projections and extensions. The first zone of resistance we are currently testing comes in at the $105.94-$106.99 area. The second zone comes in at $108.15-49. I'll say that if we are going to see a pullback, these are the two standout zones where I would watch for it to occur. One other bearish factor at the moment is that price is still clearly below the 200-day simple moving average.

Now beyond the price resistance we are currently up against, there are also some timing factors around the recent high made on Feb. 22. You can see three cycles illustrated on the chart that come in from Feb. 22-25. There is also a calendar day time histogram projected from the last minor low that also points to "time resistance" to the rally from Feb. 22 to Feb. 24.

I like to use what I call a trigger before entering the market. The video here will explain what I watch for.

So far we are seeing some sell triggers against the first resistance zone. If you elect to enter a bearish strategy such as buying some puts or a bearish options spread, you either can place a stop above the most recent high or above the high end of the zone. This setup is a bust if we clear both areas of resistance illustrated on the daily chart of JPM.

At a minimum I'm going to look for at least a $5 decline off the recent highs and also would be open to more.

At the time of publication, Boroden has no positions in the stock mentioned.