Four trades for move higher in JP Morgan: Bonus Idea

Here is your Bonus Idea with links to the full Top Ten:

The world is watching the dysfunction in Washington but as that continues JP Morgan, $JPM, topped 2nd quarter earnings estimates. This seems to amuse Jamie Dimon. But what has not amused him is the fact that his stock price is stuck in a box. It got a boost after the election in November but then has stalled in a range between 82 and 94.50 since December. In a glass is half full sense, it bounced off of support at the beginning of June and reached the top to start July, and since has held much closer to the top.

The Bollinger Bands® are squeezing, often a precursor to a move, and if it should break to the upside there is a Measured Move to about 109 to match the move into the box. The recent up leg would give a Measured Move to 102.50 along the way. The RSI is pulling back though it remains in the bullish zone, while the MACD is dropping. Momentum is not in favor of a move up. There is no resistance above 94.50 and support sits below at 90.50 and 89 then 86 and 84.50 before 82. Short interest is low under 1%, and the company is not expected to report earnings again until October 12th.

The options chain for August shows the biggest open interest at the 92.50 Call Strike, followed by equal size at 90 and 95. Moving out to September open interest ramps from 90 to a peak at 97.50 on the Call side with the biggest at 90 on the Put side. In October, the first after the next earnings report, open interest is biggest by far at the 95 and 100 Call Strikes. All this suggests options traders expect a drift higher through to the next earnings report.

JP Morgan, Ticker: $JPM

Trade Idea 1: Buy the stock with a stop at 90.50.

Trade Idea 2: Buy the stock and add an October 90/85 Put Spread ($1.45) for protection. Sell the December 100 Calls (85 cents) to lower the cost.

Trade Idea 3: Buy the October 90/92.5 bullish Risk Reversal (20 cent credit) for a run higher into earnings.

Trade Idea 4: Buy the October 92.5/August 94 Call Diagonal ($2.00). Continue to sell shorter dated higher strike Calls as the August Calls expire.

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After reviewing over 1,000 charts, I have found some good setups for the week. These were selected and should be viewed in the context of the broad Market Macro picture reviewed Friday which as the last full week of July ended and the markets looked to face the dog days of August saw equity markets knocked back by an unexpected jab punch, shocked but not really damaged.

Elsewhere look for Gold to continue in its uptrend while Crude Oil also moves higher. The US Dollar Index continues to look weak and headed lower while US Treasuries consolidate with a short term bias higher. The Shanghai Composite looks to continue to drift higher while Emerging Markets continue their uptrend.

Volatility looks to remain at very low levels keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. Their charts suggest a pause or small pullback may be in order before they continue higher, with the SPY the strongest and the IWM and QQQ a bit weaker short term. Use this information as you prepare for the coming week and trad’em well.

If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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