As opposed to the energy sector, which was moved straight up over the past six months with nary a pause even with multi-year resistance knocking at the door, the now benign financials are adhering to the old axiom that “price has memory.” We know that (what the market deems to be) significant headlines on the front page of newspapers will often trump technical analysis for the time being. To be sure, the possibilities of severe disruptions in the oil supply has been enough ammunition for energy stocks to continue to rise and trump technicals over the past several weeks.
Of course, trading the news involves higher risks than usual, in that you are often chasing sloppy charts, volatility, and are simultaneously running away from the fact that as soon as the headlines abate, there will be a stampede towards the exits. The most conservative way to play trading headlines in a given sector is to only get involved with the cleanest charts. Even then, though, you are still prone to being swept out with the bathwater. Choosing to avoid the mess altogether might not be the sexiest way to gain a reputation as a hot shot trader, but I am more interested in buying a consolidation of JPMorgan Chase these days anyway.
As you can see below, JPM is pausing right where you would expect it to on the weekly, with moving averages coiled and ready to turn up. The presumption over the next few months is that the resolution to this friction will be up and out. I would view a 10% pullback from these levels as a better gift than a pre-release iPad 2.
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Thanks Chess.
where would you price in the EMC wells Fargo situation? It looks like the market has priced it in around this level a few time already. I think your “Price Has Memory” line is the memory of these crazy numbers that have been thrown around like, 60 billion. .. I think the biggest knock on the big banks I think is uncertainty. How do we know what these banks will look like in 5 years? What happens when the Fed stops paying interest on reserves? I can’t buy any big banks until I know what short term money markets are gonna look like…. Technically the chart is sweet as that memory resistance line could turn into the handle of a sweet looking cup. A four week tight handle and break of that line would be convincing as hell on the base on base tip..
that is a sweet cup on jpm,but look at the last candle printed….i would be surprised,”if” it didnt break down.how many times do we see a lovely cup,only to have a failed handle formation.