J.P. Morgan Chase and Company – The bitcoin frenzy!
Why did you chose J.P. Morgan Chase and Company?
JP Morgan was chosen because it is one of the world’s leading financial heavy weight stock. It’s a blue chip and also a household retail investment. Thus, retail investors along with the institutional investors reap the benefit of this investment. Indeed, this stock is resilient and a financial mammoth with tentacles in each and every part of the world.
Overall view on the future of the security
J.P. Morgan is mammoth super giant in the financial sector with global dominance, from market making activities, to investment banking to asset management and retail banking. What emerged from the ashes on Lehman Brothers bankruptcy in 2008 as the market leader, is now giving its competitors a run for their money. The stock has a bright future considering the innovations in fintech and cryptocurrencies (Discussed further ahead in this report) that JP Morgan is taking under the leadership of Jamie Dimon.
JP Morgan’s anonymous crypto-currency might as well give Bitcoin a run for its money 10 years down the line to dominate the blockchain diaspora. Whilst ripple is working with American Express and Santander to help them outsource innovation. Jamie Dimon is driving innovation and R&D into blockchain right from where home is in New York. JP Morgan might just become the firm equivalent to those that created shovels in the gold rush, to profit most from this irrational exuberance with and into blockchain revolution.
When the crypto hype calms down, into more rational growth rates JP Morgan will definitely emerge as one of the lead firm standing tackling the changes with a should to should competition to Goldman Sach’s “SetlCoin”. JP Morgan has inherent upside with Trump Tax plan, dollar repatriation to the United States, Quantitative easing, and rising interest rates JP Morgan seems to have a bright future ahead, as of 25th January 2018 treasury secretary Steven Mnuchin has hinted on competitive devaluation of dollar.
This may fuel growth not only in terms of trade but internal consumption may increase which eventually will fuel domestic investments, with trump’s wall plan infrastructure companies may benefit – it is expected that due to strong rhetoric an American company might be chose, which indicated that the money might remain domestically. This eventually on a macro scale is a massive positive for the banking sector. Thus, as JP Morgan is a major play both domestically (in US) and all around the world. JP Morgan will be a financial key beneficiary of these reforms.
Chase credit cards are also a direct competitor to American Express within United States, this might also exacerbate Chase’s competitive advantage over American Express largely due to these factors. Fundamentals, Geo-Political scenarios, Technical Analysis and behavioral finance expectations all paint a cheerful picture to support a bullish sentiment on J.P. Morgan Chase & Company.
Technical Points
Monthly
If we look closely in the chart above we can notice that the long term support and resistance trend channel. In End of 2016 on account of the following US Presidential election, JP Morgan Chase & Company broke out of the long term resistance and has been running ever since. Even though there is still steam in the engine, which might even turn out to be a high speed bullet train.
The main question however, is will this be an Amtrak Bullet train caused by JP Morgan share price or will it just be a mere rash driver cruising in a Chevy Camaro.
This is for us to find out, this share seems it has strength to run but has also run up a bit too much.
We can optimistically expect a consolidation (or a small correction) but the trend remains to rise overall.
Investors could remain long with cautiously following major developments. Risk averse investors could potentially book profits and wait for a correction to re-enter.
Investors with a significant risk appetite may remain intact but have a narrow stop loss in the long term in order to benefit from the correction and re-enter at the correction, even though the trend is upwards a correction is highly anticipated./
Daily chart
If we notice in this daily candlestick chart we can distinctly see three support and resistance ranges market “zone 1”, “zone 2” and “zone 3”.
JP Morgan was trading in zone 1 since 2005 and suddenly broke out of the range in 2013. While this was a noble gesture it future remained range bound and in zone 2.
Following President Donald John Trump’s election in late 2016, based off of the economy unshackling Banks ans financial institutions and specially repeal and replace of Dodd-Frank and other burdensome some regulations. Speculators helped the stock brake out with and into Zone 3.
Zone 3 gives rise to our currently investment reality regarding JP Morgan Chase & Company
Short Term
For the short term we can clearly evidence that Ichimoku Kinko Hyo, Bollinger Bands and Kumo clouds have all aligned in a perfect idiosyncrasy to deliver flawless technical indications.
- Long: Anyone who is long should remain to hold, and may potentially add more to their positions.
- Sidelines: Anyone who is on the sidelines and wants to go join the action can long, they could go ahead and join the band wagon
- Short: Anyone short on this stock is hereby advised to liquidate their positions, take the losses (if they are in losses) and get in line with the long positions to take on the bullish momentum and use the moment to recoup the losses they faced from their previous short position.
DISCLAIMER: Investors and Traders may go Long in this stock for all short, medium and long term.
The analyst would however reiterate that we must keep a “cautiously optimistic” view in medium and long term as the data at certain point in time down the line may indicate a trend reversal and thus must be taken into consideration.
4-Hour chart
This is the 4 hour chart indicating a time frame from June 2014 to 25 January 2018.
The purple line indicate support and resistances for JP Morgan chase & Co. in the 4 hour time frame for various times.
The Ichimoku Kinkou Hyo and Bollinger Bands clearly indicate bullish momentum with a short term support just below $108.
In the graph below we can clearly evidence that we have a major resistance and a major support at $95.30 and $81.45 respective. However, we also evidence a minor support/resistance level within these major support and resistance levels at $87.80
In the graph below we can clearly evidence that we have a resistance and a support at just below $108 and $95.30 respective. However, we also evidence a pullback half way within these levels though this was reversed and the stock kept on climbing up until it reached the resistance.
Lastly, in this graph below we can clearly evidence that the share price battled a fierce conflict of price discovery with range bound trading around the resistance. However, in hind sight we can clearly evidence that the candle sticks were really telling us an anecdote by forming higher lows.
This trend continues and finally the strong momentum was successful to break through the resistance. Ever since that has happened. We have evidenced Higher highs and Higher lows. The candle sticks are way about Kumo clouds, Senkou span A, Senkou span B, the tankan sen crossed Kinjun Sen from below in November 2017 thus indicating a stronger bullish momentum than there was before this transition occurred. The candle sticks have been testing the Bollinger bands ever since this cross. however, the most recent was on 12 January 2018 and another one on 24 January 2018 (this one was more like a mere pip squeak).
The tankan Sen is indicating a strong bullish trend, with multiple analysis techniques indicating the same conclusions, to assert considerable confidence in our analysis. Since multiple analysis indicate the same outcome. We must have strong conviction on precision of our analysis and its result.
CONCLUSION:
- Monthly: Bullish trend with a possibility short term pull back. We are cautiously optimistic.
- Daily: Medium Bullish trend with possibility of headwinds, and a potential short term correction and profit booking opportunity. Long term Bullish but we may have a pullback in the medium term to consolidation
- 4 Hour: Very Strong Bullish trend with possibility of headwinds
Fundamental Points
- Explain the summary of the company. Who are they?
The company is J. P. Morgan chase & company. This has been chosen as it is one of the leading blue chip stock which is often very popular amongst both institutional as well as retail clients of both Invest Diva Investment Management as well other third party clientele that subscribe to this investment white paper.
I am sure JP Morgan Chase doesn’t need an introduction, its name is enough. However, before JP Morgan became JP Morgan Chase & Company it was known as Bank of the Manhattan. The company was founded on September 1, 1799 by Aaron Burr.
JP Morgan Chase & Company is an American iconic banking and financial services holding company headquartered in New York City with tentacles all across the world.
JP Morgan Chase & Company is the largest bank in the United States, the world’s sixth largest bank by total assets, with total assets of US$2.5 trillion, and the world’s second most valuable bank by market capitalization.
Initially the Manhattan Company The Manhattan Company was formed in 1799 with the ostensible purpose of providing clean water to Lower Manhattan. However, the main interest of the company was not in the supply of water but rather in becoming a part of the banking industry in New York. At that time, the banking industry was monopolized by Alexander Hamilton’s Bank of New York and the New York branch of the First Bank of the United States. Following an epidemic of yellow fever in the city, Aaron Burr founded the company and successfully gained banking privileges through a clause in its charter granted to it by the state that allowed it to use surplus capital for banking transactions. The company raised 2 million dollars, used one hundred thousand dollars for building a water supply system, and used the rest to start the bank.
The company apparently did a poor job of supplying water, using hollowed out tree trunks for pipes and digging wells in congested areas where there was the danger of raw sewage mixing with the water.
The Bank started paying dividends in July 1800, and in 1853 the Manhattan Company became one of the original 52 members of the New York Clearing House Association. In 1923 it moved its headquarters briefly to the Prudence Building and then in 1929 built what was briefly the tallest building in the world at 40 Wall Street on the site of the Gallatin Bank Building. A 1929 merger made Paul Warburg its chairman. The Bank merged with Chase National Bank in 1955 to become Chase Manhattan in 1996, Chase Manhattan was acquired by Chemical Bank, who retained the Chase name, to form what was then the largest bank holding company in the United States. In December 2000, the bank acquired J.P. Morgan & Co. to form JPMorgan Chase & Co.
- Who are their competitors?
JP Morgan has a diversified diaspora of peers however, we can successfully drill down to a niche of Big 4 competitors which are Bank of America, Citi Group, Wells Fargo and Goldman Sachs.
Source: Thompson Reuters Eikon
- How do they compare to their competitors?
This is very intriguing as the street estimates JP Morgan to outperform most of it competitors achieving an estimated EPS over the next twelve months of 35.07% except Bank of America which is expected to achieve an estimated EPS over the next twelve months of 42.50%.
This is a deal sweetener as the current Last twelve months PE has also been to the lower end of its peer ranking table. Thus, estimating a higher ROI.
- Do they have any upcoming products or services?
JP Morgan has been working steadily on acquiring a few imperative paradigm shift war chest towards digitization and the blockchain bandwagon.
Firstly, JP Morgan completed its acquisition of WePay (which is now a wholly owned subsidiary of JP Morgan Chase & Company). WePay is an online payment service provider based in the United States that provides an integrated and customizable payment solution through its APIs to platform businesses such as crowdfunding sites, marketplaces and small business software companies. It offers partners fraud and risk protection.
Secondly, a little bit less publicized development JP Morgan has been working on its own blockchain token. Late last year Goldman Sachs got its patent approval for “SETLCoin”. To combat its competitors with a head on battle for the dominance in the blockchain backed transaction execution business JP Morgan filed a patent for Bitcoin styled payment system.
This is very important because like bitcoin, JP Morgan’s proposed system would allow people to make anonymous, electronic payments over the internet, without having to reveal their name or account numbers or pay a fee, according to the patent application. This anonymity is essentially a Unique selling point and a very easy sell for JP Morgan and may eventually even cannibalize bitcoin anonymity was an inherent essential that led to bitcoin’s growth and should do the same with JP Morgan’s blockchain.
JP Morgan has had this patent in development phase since 1999. However, now that they have filed for it details have emerged on plans to cannibalize on entire debit and credit card businesses. We all know American Express Company is a direct competitor of chase. A rational inference can be drawn than this might directly be motivated to cannibalizing. In 2015 Chase signed on CostCo as a client, even though this might look normal wahat would be very interesting is that CostCo was American Express’s biggest corporate client and chase won their business over. Thus, one must wonder if this blockchain development by JP Morgan Chase is motivated at it’s core to combat a long standing competitor (i.e. American Express).
JP Morgan is also inclined to using an open source public ledger system which would instill an added layer of assurance to our scarred millennial generation which has in affect been repelled from banks due to some bad apples in the industry.
Whilst these developments are interesting we must surely keep them at back of our mind as we must always invest thinking for the future and not for the past. Some of our mature clientele might think of block chain as a hype or a fad or even a bubble. The simple answer is yes it is a bubble we are in 1993 before dotcom bubble. However, we must give credit where credit is due and the matter of fact is that this technology is true at its core and will not only survive but will shape the 22nd century. Either we can oppose and dismiss it or try to embrace it and learn it and dominate the competition at its own game and this is what I think JP Morgan Chase & Company are doing.
- What is their company’s structure? (i.e. Founder, CEO, recent changes in staff, etc.)
This company has been in existence 1799, for about 218 years, they have live through world wars, the great depression, black Monday, the dotcom bubble, the 2008 housing crisis.
The above flow chart evidences the company structure of JP Morgan Chase And Company.
Current CEO is the honorable Jamie Dimon who has stirred the ship out of the acidic back waters of 2008 subprime housing crisis into its dominance in today’s day dominant financial institution.
6) Any new scandals or PR developments?
One very special PR development has been shadowing the company lately and that it the relationship between the CEO Jamie Dimon and Bitcoin. Mr. Dimon called bitcoin a fraud and a bubble, this resulted in markets loss of confidence in bitcoin and the price started falling.
The second instance was when Mr. Dimon retraced his statement and withdrew his comments suggesting bitcoin was not a bubble.
Lastly, Mr. Dimon recently again called Bitcoin a bubble and whilst I agree that the instrument might be valued in bubble territory the underlying technology is not a bubble.
The development to note is what attracted widespread criticism from media and investors calling market manipulation. This is because while, Mr. Dimon was criticizing Bitcoin, JP Morgan was buying bitcoin. I will not make any calls on legality of this action as it’s not my place to comment.
Capital (risk) Points
- What is their stock’s Beta?
Source: Thompson Reuters Eikon
The 5 Year (Monthly) Beta is 1.2 indicating that the JP Morgan’s Share price is more volatile than the market. In our case since the beta is 1.2 this translates into JP Morgan being 20% more volatile than the market
- Is this a generally growing stock, or a cycling stock?
JP Morgan Chase & Company is a growth stock this is evident by it naked price action chart.
On the other hand, JP Morgan is a Financial institution/bank thus it is positively correlational with the overall economy. This became evident in 2008 subprime housing crisis when the economy went belly up so did JP Morgan.
Thus it would lead any prudent investor to argue that JP Morgan is a Cyclical Stock as well as growth stock.
3) When is their earnings date?
Source: NASDAQ website
The following latest earnings data has been downloaded from NASDAQ
As for the Earnings Forecast, we were able to obtain the following from NASDAQ
Source: NASDAQ website
Thus, the next quarterly earnings date is now in March 2018.
However, if one was to analyze the earnings report for Q4 FY18 it becomes evident that the street was expecting an EPS of 1.69 whereas JP Morgan delivered an actual EPS of 1.76. With an earnings surprise of 4.14%. This in addition to the 18.48% ROI that an investor would have earned had they invested in the JP Morgan stock at the end of Q3 FY18.
Source: Google
Market Sentiment
- Viewing the short-term charts, and general news and speed of growth, what is the current market sentiment?
Let us start by agreeing on a fact the market is way too big than any of us, the market is way too bigger than any of us and we cannot, will not and shall not ever single handedly influence the price discovery of JP Morgan Chase & Co.’s stock.
Thus, we should trade the market trend and not our preconceived notions, the market can remain irrational longer than we can remain solvent and thus we must come to grips and accept the fact that we need to be willing to liquidate, change or even reverse our positions at any given moment based on the trend. As we are trading the trend, if the trend reverses we must not become shy or ashamed to alter our positions rather embrace it happily. We must remember the market is bigger than all of us. We are here to make money, and being in the money supersedes any other preconceived notion on the pecking order of priorities. Thus, first and foremost is the fact that we should make money. This essentially means that we remain rational alpha generators.
The speed of growth has been steep indeed but we must also consider that the shackles of Dodd-Frank have come off and our golden unicorn is ready to run, this coupled with a tax cut, increased capital injection in the system due to trump’s dollar repatriation, anticipated addition in balance sheet due to the wall might as well give JP Morgan that jet fuel that it is so lusting to skyrocket to new levels.
Threats watchlist
Recent back and forth of comments by Steven Mnuchin, Mario Draghi, Xi Jinping and Donald J. Trump may potentially hint towards a significantly weaker dollar. If that happens and it is exacerbated by federal reserve liquidating its balance sheet and rising interest rates, it has been argued by the likes of Peter Schiff that it may cause Hyperinflation or in the territory of near hyperinflation scenarios. This is one potential threat that investors must look out a sharp markets loss of confidence can be catastrophic. However, it would not happen intraday, hence it is imperative that investors keep on performing regular due diligence checks on JP Morgan if they do have considerable positions in the underlying. It is unacceptable for any investor to expect the forecast to remain constant considering the ever changing landscape of the financial sector.
A hedge position with a long into Gold, energy, healthcare and VIX is advisable. Investors should also be warned that recently experts to the likes of Alan Greenspan have referred to Bond market as being in bubble territory.
IDDA Strategy
Putting the above points of IDDA together, conclude whether or not this stock is right for you. If it is, what levels should you set your limit order? When should you take profit?
I would have enter at any price in the range highlighted by the trend channel in the graph below and would exit at the first sign of trend reversal based on technicals. As the stock is currently making new highs everyday it is not possible to predict an exit price or even range. However, it would be advisable to trust Ichimoku Kinko Hyu and Bollinger bands to maintain a watchful eye and warn us on any developments in the trend. We will be trading the trend in this stick and thus the trend is at the front and foremost of our analysis. We will consider our analysis techniques to base future exits.
As anticipated we might have a major pull back in future, but the long term trend is upwards. So, the clients that wish to invest can be rest assured as far the client that wish to trade the stock, technical trend spotting is what will dictate our action and whether and if we will exit our position will depend on if the tankan sen crosses kinjun sen from the above or if it will be on on top or below a kumo cloud, even if it touches a kumo cloud we may consider liquidating our position in the future. If in future the candle sticks start testing Bollinger bands to the lower end we will reverse our position and take a short position.
When following a trend lurking trading strategy we must be willing to follow reverse our position and not just booking profits. This means when the stock starts going down we must start shorting the stock, and if and when againthe trend reverses we must be willing to again take a long position in JP Morgan stock.
Trend Lurking replication trading strategy involves us basing our position entirely on the basis market sentiment. If the market sentiment is bullish we must have a long position additionally if and when the market has a bearish position we must respond again by booking profits, and entering into a fresh short position. We must follow this strategy to the end and we will always be profitable. As our position will always depend on tracking the market movement.
We will subsequently, keep an eye on this underlying and will keep our clients updated if in case any changes occur on the underlying.
However, the clients are advised to always perform regular due diligence and enquiries on the underlying by contact in their respective client representative at Invest Diva Diamond Analysis and myself or one of our client reps would be honored to give you an update on the underlying. At IDDA your wish is our command, communication should not be a barrier our clients are like our family, and we are a unit. Please do not hesitate to contact me or any one else from IDDA.
