JPMorgan Chase (JPM) Trading Lower After Buffett Sale

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JPMorgan Chase (JPM) Trading Lower After Buffett Sale

Two weeks ago, Warren Buffett sparked a bank rally by revealing that Berkshire Hathaway Inc. (BRK.B) had purchased more than 20 million shares of Bank of America Corporation (BAC).The rally came to a halt on Monday after a late Friday filing revealed that the legendary investor had also sold more than 35 million shares of Dow component JPMorgan Chase & Co. (JPM), as well as shares of The PNC Financial Services Group, Inc. (PNC) and The Bank of New York Mellon Corporation (BNY Mellon) (BK).

Key Takeaways

  • Warren Buffett has sold almost 25 million JPMorgan Chase shares.
  • The stock has failed to break through the 200-day moving average, suggesting that it is still in a downward trend.
  • Since June, committed purchasers have gone.

Taken together, it seems that Buffett had no plans to increase his exposure to the struggling banking industry. Rather, he rotated a portion of his money out of other banks to pay for the new acquisition, while adding gold exposure with the remainder. This ruse mirrored the unfavorable market circumstances caused by the COVID-19 outbreak, but it did not sit well with investors, who elected to depart the market to begin the new week.

JPMorgan Chase stock is now rated as a “Moderate Buy” by Wall Street, with 11 “Buy,” 4 “Hold,” and one “Sell” rating. Price estimates vary from $80 to $122, with the stock falling roughly three percent on Monday and trading around $10 below the median $109 goal. Since March, no major banks have broken through support at their 200-day moving averages, limiting the likelihood that they will meet higher goals until 2021, at the earliest.

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The act of transferring investment assets from one sector of the economy to another is referred to as rotation. Sector rotation entails utilizing the profits from the sale of securities relating to one investing sector to acquire assets in another.

JPMorgan Chase Long-Term Chart (2009 – 2020)

TradingView.com

JPMorgan stock fell to a six-year low in the mid-teens in 2009 before rising in a rebound wave that ended around six points below the 2007 peak in 2010. In 2013, it made a round trip into that level and broke out, hitting a peak of 2000 in 2015. Following the 2016 presidential election, the uptrend completed a multi-decade cup and handle breakout, achieving strong gains before topping out in the first quarter of 2018.

An inverted head and shoulders pattern was carved into an October 2019 breakthrough, which hit an all-time high of $141.10 on the first trading day of 2020. It fell from a modest double top in February to a three-year low in March, where it found support. Worryingly, the rebound into the third quarter has failed to break through broken support, increasing the possibility that the stock has begun a secular downturn that may ultimately break through the March low.

A correction occurs when the price of a securities falls by 10% or more from its most recent high. Corrections may occur to individual assets, like as a single stock or bond, or to an index that measures a collection of assets.

JPMorgan Chase Short-Term Chart (2018 – 2020)

TradingView.com

The accumulation-distribution indicator on-balance volume (OBV) reached an all-time high in the first quarter of 2018 before entering a distribution wave that concluded at a two-year low at the start of 2019. Buying power into 2020 failed to keep pace with positive price movement, halting at the OBV midpoint, while the first-quarter selloff found support near the 2018 low. Minor accumulation aided the increase until June, but purchasers have gone on strike since then.

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After breaching the broken 200-day exponential moving average (EMA) and hitting the.618 Fibonacci selloff retracement level, the second quarter recovery reversed. A few sessions later, it broke over the moving average and failed a second attempt this week, sustaining resistance between $100 and $105. More crucially, the pattern off the March low is corrective rather than impulsive, boosting the prospect of a resumption of the first-quarter rout.

The Bottom Line

After Warren Buffett reported a major stake sale, JPMorgan shares reversed at the 200-day EMA resistance.

Disclosure: At the time of publishing, the author had no investments in the aforementioned securities.

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