JP Morgan is the Largest US bank and it has had its fair share of ups and downs over the years, the bank has had a tough start of the year due to the global pandemic like many companies. However, we will explore some of the Technical factors that point towards JP Morgans shares being undervalued.
The Bollinger bands are an additional indicator used in technical analysis to detect volatility if the bands are close together then there is considered to be low volatility however if the bands widen then there is considered to be high levels of volatility. Also it is very uncommon for a stock to move outside the Bollinger bands if it does, it will more often than not shift back inside the Bollinger band. In the graphic above we can see that the Bollinger Bands have widened recently and for now that suggests that the price is less stable and more volatile, again indicating that the price is likely to change rapidly and unexpectedly. It would also be important to identify the fact that JPM is currently sitting at the bottom of the Bollinger band range and it is likely that price will rise to head back into the middle range of the Bollinger band.
Commodity Channel Index
The Commodity Channel Index (CCI) is a momentum oscillator commonly used in technical analysis be investors and analysts alike. It’s used to identify oversold and overbought levels as well as having the ability to identify possible trend reversals and trend continuations. Originally used for identifying trends it has continued to prove much more useful when looking at financial instruments. The CCI measures a commodities variation from its statistical mean, in other words a commodities change in price compared to its average change in price. Typically this results in a value between 100 and -100, when a value is larger than 100 this usually indicates an overbought signal and -100 an oversold signal. As it is in this case the CCI is above 100 potentially indicating an overbought signal and a new bearish trend. Taking a look at the gold line in the graph we can see JP Morgan have a CCI -55 highlighting that JP Morgan is currently undervalued.
Balance of Power
The Balance of power indicator is very simple when the line is above 0 it indicates that buyers have dominance over sellers and when it is below 0 it indicates that sellers have dominance over buyers. The indicator moves between 1 at the very highest and -1 at the very lowest the indicator tracks how strongly price trades to extreme high and low levels. The Reading JP Morgan has is .95 which strongly indicates buyers are dominating the sellers in the market pointing to the conclusion that JP Morgan shares may move higher.
There is clearly an increase in Volume highlighted by the vertical bars underneath the chart. Showing that trading activity among investors is increasing which normally means that a larger number of investors are buying the stock. With a higher than average trading activity, the volatility of JP Morgan is likely to increase as well as a likely increase in the value of the underlying stock.
With all this said it is always important to remember to diversify your investments to ensure that you are less sustainable to market volatility and rapid market movements. Also if you are new to investing make sure you look into trading with a demo account to practice, more information on that can be found here.