Through TheFly's Eyes: JPMorgan Chase & Co.
from Theflyonthewall.com






CNBC reported earlier today that Bank of New York (BK) was close to selling 300 of its branches for an estimated $4B, most of which to JPMorgan Chase (JPM). Punk, Ziegel & Co. feels that not only will JPMorgan buy Bank of New York, but next year it will buy Morgan Stanley (MS). Merrill Lynch believes that Astoria (AF), New York Community Bancorp (NYB) and Hudson City (HCBK) should all trade up on the potential deal.

Analysts saw the potential deal as another sign of healthy consolidation in the retail banking field, assuming that JPMorgan then shuts down hundreds of redundant banks. Retail banking is still viewed by most analysts as “over-retailed,” hence the potential deal would continue what Wall Street views as a positive branch-rightsizing trend. However, only the Bank of New York rose on the news, up $1.40 to $35.80 in early Thursday afternoon trading. Predictably, JPMorgan was down 40c to $41.20, a normal move, given that the acquirer in a transaction generally drops in price. However JPMorgan’s primary competitors also declined: the Bank of America (BAC) was down 40c to $45.55, Citigroup (C) was down 30c to $47.30, and Merrill Lynch (MER) was down 65c to $77.65. The sector’s move lower on the news gave some in the financial community an opportunity to trot out an old Wall Street adage: “Where there’s one, there’s more,” with the `one’ being the potential Bank of New York branch sale. Is more retail bank branch consolidation on the horizon? At least initially, the retail banking sector appears to be signaling ‘yes.’

Our Technical analyst notes that JPMorgan’s stock has made a parabolic bounce, as we can see from the chart, off its lows in October of last year. That low coincided with the lows of the general market. It's no surprise given the weight and importance of the financials in the various indexes that this would be so. As one old salt told me, the banking complex is the most important complex for the tape. It won't rally or fail unless the financials are cooperating by moving in the same direction.

For that reason it's worth considering that the rough curving trend-line we see is topping out, possibly losing upside momentum much the same way a ball flying through the air does. It's not yet a failure by any means, but that topping process is one we must watch carefully. The key levels happen to be very close by today and some are marked on the chart for handy reference. The levels to watch are $41.04, $40.95, $40.30, $39.69, $39.00, $38.42 and $37.80. Resistance, levels which if broken to the upside would be bullish are as follows: $41.70, $42.50 (key level), $43.19.


Chart created with Equis MetaStock