Wednesday, July 20, 2011

Trade Update: JPM

JP Morgan JPM responded to the DOW's 202 point rally with quite a yawn. The shares closed up $0.56 at $40.39.

Take a look at the long down trend line which began just under $48 in April ending at yesterday's close. Draw a line from $46 in May to yesterdays the prominent candlestick just underneath $42 about nine days ago. What we have to hope for now is that down trend line not to be broken. As long as it stays intact our trade is good to go.

Despite yesterdays big rally everything on JP Morgan looks extremely ordinary. First look at the volume. Yesterday's volume was right at 40 million shares which was right at the 50 day moving average. Even the stochastic is flattening out at 50%.

All we can do now is prepare for a possible clear break of the downtrend line. What is a clear break? That is never well-defined, but I would certainly think that a break above $42 would count. Notice the 50 day average seems to be moving down to the actual price action. So, you can use the 50 day average as an early warning indicator. That is a break above the 50 day moving average means get your mouse finger ready to cover your short. But for now just leave the stop in at $42.75.

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