Jamie Dimon Is Buying JPM, But The Charts Warn You Shouldn't
JPMorgan Chase (NYSE: JPM) Chairman and CEO Jamie Dimon made news last week when it was announced he was personally buying $26 million worth of company stock as prices were hitting two-year lows. As
The Wall Street Journal put it, his purchase was intended to "boost confidence in [the] banking industry" and "stem the tide of negative sentiment overwhelming bank stocks this year."
JPM jumped in after-hours trading on Feb. 11 following the news and hasn't looked back, gaining more than 10% in the past three trading days.
The question is whether Dimon's bold move was enough to turn the tide in the sector or even just in JPM.
The short answer is no.
As we can see on the chart, it's been all downhill for JPMorgan this year, starting with a breakaway gap to the downside on the first trading day of the year. This is a powerful event that signals a stock rapidly changing its condition from uncertain to undeniably bearish.
http://www.profitabletrading.com/sit...-17-16-jpm.pngHad this rally not occurred, there would be no doubt about the stock's bearish conditions. So in that regard, Mr. Dimon seemed to be successful. But the technicals still do not line up in favor of an extended advance.
For argument's sake, let's start with the positive changes on the chart, including what appears to be an island gap reversal to the upside last week. This is a pattern that suggests the tide washed all the way out and then started to rush back in. It begins with a falling trend and culminates with a gap down into what should be a final low.
The day of the final decline typically leaves a small bar, or candle, as there is no follow through beyond the initial decline. The next day, the reverse occurs and the stock jumps, or gaps, back up. The pattern on the chart resembles an island surrounded by water, hence the name.