Wednesday, June 27, 2012

JP Morgan (JPM) breaks through resistance

Markets rallied at the open today (Wednesday, June 27) and then vacillated within a relatively narrow range. Here’s how the indices closed:

S&P500 +0.9%
NASDAQ +0.7%
DJIA +0.7%

JP Morgan advanced past an important resistance level in today’s trade. The stock broke through the upper boundary of a downward-sloping price channel stretching to May 1, a tumultuous period that featured surprise revelations of a gigantic trading loss by one of the bank’s proprietary trading desks.

JPM, 180 d 1h (zoomed in)
Today’s rise of 3.0 percent brought JPM to different price channel resistance, so the stock might be expected to consolidate underneath $37. Downward retracement to the breached price channel (approximately $35.5-36) is a possibility.

Life Technologies Corporation (LIFE) matched the day’s rise in JP Morgan shares; it too rallied 3.0 percent. This NASDAQ-100 component seems less poised for further appreciation, however. LIFE’s intraday high of $45.35 brought the stock precisely to resistance from a 6-month price channel, and retracement lower seems likely.

LIFE, 180 d 1h
That said, LIFE is enjoying some serious bullish tailwinds at the moment. Today’s price action (on the hourly chart) was more than $3.00 above the 200-period simple moving average (SMA), an intensity of bullish sentiment not seen since February. Demand for LIFE shares is strong, which makes violation of resistance somewhat more likely.

Finally, the WTI crude oil futures market (/CL) is worth a look. The relationship of recent price action and the 200-day SMA is developing as a mirror image of last Fall, when a nadir was reached at $75. In both cases, bearish sentiment turned as price reached about $17 below the 200-day SMA. Time will tell whether this week’s nascent rally in crude will mark a durable turning point.

/CL, 4 y D (zoomed in)

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