Technical Double Top Could Lead to JP Morgan Chase (JPM) Drop
JP Morgan Chase & Co recently achieved a double top pattern. This pattern is a significant technical signal that normally sends the stock down to a common level of support. The double top and other technical indicators are detailed below. JP Morgan Chase has been in a long term bull trend and will most likely continue after the stock drops.
When we look at technical indicators, the relative strength index (RSI) is at 55.7791. RSI tends to determine trends, momentum, overbought and oversold levels as well as likelihood of price swings. I personally use anything above 75 as overbought and anything under 25 as oversold. Currently the RSI is neutral and has been moving downward. It is roughly at the same level it was last time a top was reached. This lead to a continual decline for the RSI and the stock. This is the first indication of likely downward movement in the short-term.
The positive vortex indicator (VI) is at 0.9785 and the negative is at 0.9991. When the positive level is higher than 1 and higher than the negative indicator, the overall price action is moving upward. When the negative level is higher than 1 and higher than the positive indicator, the overall price action is moving downward. The positive and negative levels have been moving in a manner consistent with downward movement for the stock The negative indicator has been rising at the same time the positive has fallen. They have just passed each other which will lead to a continual decline for the stock. Once again, this indicator is roughly at the same level it was when the last top was declining. This is the second indication of likely downward movement in the short-term.
The stochastic oscillator K value is 63.1339 and D value is 76.4461. This is a cyclical oscillator that is highly accurate and can be used to identify overbought/oversold levels as well as pending reversals and short-term activity. I personally use anything above 80 as overbought and below 20 as oversold. When the K value is higher than the D value, the stock is trending up. When the D value is higher that the K value the stock is trending down. The stochastic is departing overbought territory which tends to lead to a decline for the stock. This is the third indication of likely downward movement in the short-term. This indicator is also near the same level it was as the last top was declining.
SPECIFIC ANALYSIS
The first top occurred in early March. The stock proceeded to drop 13.13% over the next 62 trading days before rising again. The light blue line across the chart represents 86.56 which has been a commonly hit mark for the stock in its recent uptrend. The aforementioned top to this level took 14 trading days to occur and resulted in a 7.90% drop.
Since the stock first broke above the 86.56 mark in December 2016, that line was in a trading day's range 43 times. That is 30% of the previous 144 trading days. This common level will most likely be hit or provide support for the stock over the following 41 trading days.
The final level studied which is most strongly dictating my conservatively placed projection is a Fibonacci retracement. According to Investopedia, "Fibonacci retracement is created by taking two extreme points on a stock chart and dividing the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8% and 100%.". A 61.8% retracement from the bottom to the top of the recent vertical distance marries up exactly with the 86.56 level. If the stock were to give back 100% of its most recent movement (May 31 low of 81.64 to July 6 high of 94.51) the stock would drop to 81.64. This is the fourth indication of likely downward movement in the short-term.
Considering the RSI, VI, stochastic levels, and recent movement from the last top, the stock should see downward movement over the short to intermediate time period. Based on historical movement compared to current levels, the stock could drop at least 5% over the next 29 trading days if not sooner.
When we look at technical indicators, the relative strength index (RSI) is at 55.7791. RSI tends to determine trends, momentum, overbought and oversold levels as well as likelihood of price swings. I personally use anything above 75 as overbought and anything under 25 as oversold. Currently the RSI is neutral and has been moving downward. It is roughly at the same level it was last time a top was reached. This lead to a continual decline for the RSI and the stock. This is the first indication of likely downward movement in the short-term.
The positive vortex indicator (VI) is at 0.9785 and the negative is at 0.9991. When the positive level is higher than 1 and higher than the negative indicator, the overall price action is moving upward. When the negative level is higher than 1 and higher than the positive indicator, the overall price action is moving downward. The positive and negative levels have been moving in a manner consistent with downward movement for the stock The negative indicator has been rising at the same time the positive has fallen. They have just passed each other which will lead to a continual decline for the stock. Once again, this indicator is roughly at the same level it was when the last top was declining. This is the second indication of likely downward movement in the short-term.
The stochastic oscillator K value is 63.1339 and D value is 76.4461. This is a cyclical oscillator that is highly accurate and can be used to identify overbought/oversold levels as well as pending reversals and short-term activity. I personally use anything above 80 as overbought and below 20 as oversold. When the K value is higher than the D value, the stock is trending up. When the D value is higher that the K value the stock is trending down. The stochastic is departing overbought territory which tends to lead to a decline for the stock. This is the third indication of likely downward movement in the short-term. This indicator is also near the same level it was as the last top was declining.
SPECIFIC ANALYSIS
The first top occurred in early March. The stock proceeded to drop 13.13% over the next 62 trading days before rising again. The light blue line across the chart represents 86.56 which has been a commonly hit mark for the stock in its recent uptrend. The aforementioned top to this level took 14 trading days to occur and resulted in a 7.90% drop.
Since the stock first broke above the 86.56 mark in December 2016, that line was in a trading day's range 43 times. That is 30% of the previous 144 trading days. This common level will most likely be hit or provide support for the stock over the following 41 trading days.
The final level studied which is most strongly dictating my conservatively placed projection is a Fibonacci retracement. According to Investopedia, "Fibonacci retracement is created by taking two extreme points on a stock chart and dividing the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8% and 100%.". A 61.8% retracement from the bottom to the top of the recent vertical distance marries up exactly with the 86.56 level. If the stock were to give back 100% of its most recent movement (May 31 low of 81.64 to July 6 high of 94.51) the stock would drop to 81.64. This is the fourth indication of likely downward movement in the short-term.
Considering the RSI, VI, stochastic levels, and recent movement from the last top, the stock should see downward movement over the short to intermediate time period. Based on historical movement compared to current levels, the stock could drop at least 5% over the next 29 trading days if not sooner.
All forecasts are based on analysis of past behavior. Prior movements are not always indicative of future movement. Develop the theory, test the theory. Do your own research. Nothing in this analysis constitutes advice. YouTube For More. Good luck!!
www.tradingview.com/chart/npdKECts/