JP Morgan posts record earnings – but bearish performance?

<p><a href="https://admiralmarkets.com/analytics/traders-blog/jpmc-earnings-bearish-stock"><img data-resize="auto" data-resize="auto" data-resize="auto" data-resize="auto" style="width:auto;" data-src="https://fxmedia.s3.amazonaws.com/articles/remote/b0dad64e1a3f8ea853667b72fbe0ac6b.jpeg" alt="JP Morgan posts record earnings, but bearish stock performance" rel=""></a></p><p>Despite US banking giant JP Morgan posting some very solid earnings numbers for the second quarter of 2020, the stock didn't take off. </p><p>Indeed, the stock of JP Morgan still trades around 30% below its yearly highs around 140.00 USD despite a revenue record of $33.8 billion in Q2/2020 – a potential bearish sign. </p><h2>A deeper look into JP Morgan's record revenue in Q2/2020 </h2><p>While JP Morgan's corporate and investment bank posted a record 5.5 billion USD profit for the second quarter, thus making more money in this division than most entire banks typically were able to generate before the coronavirus pandemic, two other divisions of JPMorgan's four main businesses point to "serious trouble ahead". </p><p>In fact, JP Morgan's consumer and commercial bank division had to set aside 8.9 billion USD for expected loan defaults across its operations due to the Coronavirus pandemic and the resulting lockdown.</p><p>Or to put it differently: the Q2 revenue found its main source because of shrewd moves made under CEO Jamie Dimon to build up its investment bank in the years after the financial crisis.</p><p>But it remains to be seen if this success will last, given the fact that sooner, rather than later, US yields are expected to drop further and take the region around 0% into focus. Since volatility and yields are positively correlated to each other, the best environment for trading will probably not last forever.</p><p>And not only this: last week showed that US mortgage delinquencies rose to an all-time high, passing the levels seen in 2008 during the Great Financial Crisis (Source: CoreLogic).</p><p><img data-resize="auto" src="https://fxmedia.s3.amazonaws.com/articles/remote/ad4ae0a6304efa5ceeac121016c4c512.png" alt="Delinquent loans spike" rel="" /></p><p>And the chart on the left doesn't include mortgages that are in forbearance, which leads us to the conclusion that non-performing loans should be expected to rise significantly, bringing US banks, but also around the globe, into potential liquidity issues.</p><p>That in mind, we have an expectation of a bearish over-performance in bank-related stocks, including the #JPM.</p><h2>How to trade #JPM in this environment?</h2><p>First of all: when looking at the daily chart in #JPM, the drop below the SMA(200) clearly signals that the overall advantage in the stock switched to the Short side. </p><p>After the surge back above 100 USD in June, the stock dropped again sharply and fell back below 100 USD per share. </p><p>All in all, the mode can be considered choppy between the April/May lows around 82.50 USD and the June highs around 113.80 USD. </p><p>Still, we currently watch for short-entries between 102.50 and 105.00 USD per share, anticipating a next leg down and test of the region around 82.50 USD, probably even lower around 77.00 USD. </p><p>A short-setup would not be given anymore with the stock rising back above 113.80 USD, leaving us with a minimum risk-reward ratio of 1 to 1.75, probably higher: </p><p><img data-resize="auto" src="https://fxmedia.s3.amazonaws.com/articles/remote/6422171b8cf238b006d5e2928704f681.png" rel="" alt="JP Morgan daily chart" /></p><p><em>Source: Admiral Markets </em><a href="https://admiralmarkets.com/trading-platforms/metatrader-5"><em>MT5</em></a><em> with </em><a href="https://admiralmarkets.com/trading-platforms/metatrader-se"><em>MT5-SE Add-on</em></a><em> #JPM chart (between April 18, 2019, to July 20, 2020). Accessed: July 20, 2020, at 10:00pm GMT – Please note: Past performance is not a reliable indicator of future results, or future performance.</em></p><p>In 2015 the value of #JPM increased by 5.51%, in 2016, it increased by 30.68%, in 2017, it increased by 23.93%, in 2018, it fell by 8.72%, in 2019, it increased by 42.8%, meaning that after five years, it was up by 122.9%.</p><p><br></p><h2>Discover the world's #1 multi-asset platform</h2><p>Admiral Markets offers professional traders the ability to trade with a custom, upgraded version of MetaTrader 5, allowing you to experience trading at a significantly higher, more rewarding level. Experience benefits such as the addition of the Market Heat Map, so you can compare various currency pairs to see which ones might be lucrative investments, access real-time trading data, and so much more. Click the banner below to start your FREE download of MT5 Supreme Edition!</p><p><a href="https://admiralmarkets.com/trading-platforms/metatrader-5"><img data-resize="auto" alt="Download MetaTrader 5 and begin trading today!" src="https://fxmedia.s3.amazonaws.com/articles/remote/e40d99e968e500f77fa8880c064302d8.png" /></a></p><p><em>Disclaimer: The given data provides additional information regarding all analysis, estimates, prognosis, forecasts or other similar assessments or information (hereinafter "Analysis") published on the website of Admiral Markets. Before making any investment decisions please pay close attention to the following:</em></p><ol><li>This is a marketing communication. The analysis is published for informative purposes only and are in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.</li><li>Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the Analysis.</li><li>Each of the Analysis is prepared by an independent analyst (Jens Klatt, Professional Trader and Analyst, hereinafter "Author") based on the Author's personal estimations.</li><li>To ensure that the interests of the clients would be protected and objectivity of the Analysis would not be damaged Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.</li><li>Whilst every reasonable effort is taken to ensure that all sources of the Analysis are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis. The presented figures refer that refer to any past performance is not a reliable indicator of future results.</li><li>The contents of the Analysis should not be construed as an express or implied promise, guarantee or implication by Admiral Markets that the client shall profit from the strategies therein or that losses in connection therewith may or shall be limited.</li><li>Any kind of previous or modeled performance of financial instruments indicated within the Publication should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.</li><li>The projections included in the Analysis may be subject to additional fees, taxes or other charges, depending on the subject of the Publication. The price list applicable to the services provided by Admiral Markets is publicly available from the website of Admiral Markets.</li></ol><em>Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, you should make sure that you understand all the </em><a href="https://admiralmarkets.com/risk-disclosure"><em>risks</em></a>.