A Year To Date Look At JP Morgan And Intel

With both Intel (INTC) and JP Morgan (JMP) reporting better than expected earnings, helping drive both stocks and major US Market indexes to fresh new 2009 highs, let’s take a quick look at the daily “year to date” charts of these ‘in focus’ stocks.

First, Intel (INTC):

Intel’s ride higher has been a relatively bumpy though steady rise, and - with the exception of a few volume spikes - volume has remained roughly around the average near 75 million shares traded per day.

Starting with TA 101, price remains in a steady uptrend, and price is above all daily moving averages, and these averages themselves are in the most bullish orientation possible - thus the trend structure favors higher prices yet to come (from a trend following or ’structure’ perspective).

Price has rallied off recent ‘tests’ of the 20 and 50 EMA (which often generate fresh buy signals) which furthers the bullishness and continues the expectation that pullbacks should generate new buy signals.

However, moving to intermediate level technical analysis, we see a negative momentum divergence (akin to a “Three Push” pattern which is also showing up in the S&P 500 and other US Stock Market daily charts) which is a non-confirmation of higher prices.

Beyond this, price has risen outside the upper Bollinger Band which is often a signal of price overextension and sign of a possible retracement/pullback as the expected ’short-term’ play.

As such, though higher prices may be on the horizon as indicated by trend structure, odds favor at least a short-term pullback/retracement to offer a more favorable risk/reward relationship (perhaps back to the 20 EMA) before getting long at these levels.

Next, JP Morgan (JPM):

JP Morgan’s chart is a bit more interesting to me than Intel’s.  First, the dominant pattern seems to be a lengthy “Measured Move” or an “AB=CD” pattern (also known as a type of “Bull Flag” as labeled).

If this measured move is indeed dominant, then the price projection target appears to be the $50 to $52 level.  There is prior resistance (not shown) from the October 2008 period at the $50 level as well, so this will be a key target to watch should price continue to rise to this level.

Unlike Intel, we are seeing a distinct and obvious negative volume divergence in JP Morgan which has lasted from the lows of March to present… this serves as a glaring “non-confirmation” of the rally (in that volume trailed off as prices continued to rise).

The momentum oscillator has also been forming a lengthy divergence as well as a shorter term “triple swing” negative momentum divergence as in Intel and the S&P 500.

Price is also forming a spike (which could be a doji) outside the upper Bollinger Band which is a sign of over-extension and is seen as a short-term sell (pullback) signal.

Stepping back to basic technical analysis, just like Intel, the trend structure and moving average structure is bullish, and will remain that way as long as price is above the 20 day EMA.

In both cases, and in the overall market in general, we have the battle of intermediate/advanced level technical analysis (divergences, overextensions - bearish) vs simple/basic TA in terms of trend structure (bullish).

As such, caution is warranted and a retracement is favored as the short-term expectation.

It’s often a good idea to look “inside the market” to key movers like JP Morgan and Intel for clues on how the broader market is likely to move.

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