Part 1

JPMorgan Chase & Co. (JPM)

Our first stock pick from the XLF for April is JPMorgan Chase & Co. (JPM), which plays a major role and is one of the fund’s biggest holdings with its 12.2% weight in XLF’s portfolio.

Company background and financial performance


JPMorgan Chase & Co. is an American investment bank and a global leader in the financial sector.

In fact, JPMorgan Chase is among the biggest banks around the world with assets valued at over $3 trillion. The Bank has got operations in more than 60 countries and has managed to become one of the largest financial service firms around the globe.

JPMorgan has got an impressive earnings surprise history. The company has been showing a very solid financial performance for many years now, but what’s more important is that it managed to deliver strong financial results and grow its earnings even during the coronavirus pandemic in the past year. In other words, it managed to keep its market presence and positioning and proved to investors and traders that it has got a very solid business model and could perform well even such tough times on the market.

The Bank has been opening branches and expanding into new regions, as well as boosting their revenues from its strong mortgage banking business, which are expected to keep boosting its financial performance in the future. Moreover, the increased vaccine use and the positive expectations for the future would also boost the company’s performance. We need to mention the fact that the lower interest rates in the US are quite a negative factor for the banking sector and that’s currently hurting JPM’s overall performance. Once interest rates rise again in the future the Bank would be able to increase its revenues from lending activities and make even higher profits for its shareholders.

In fact, JPMorgan beat analysts’ expectations in the last 3 quarters during the pandemic and that has been very positive for its share price performance afterwards.

The most impressive result came out in the 4th quarter when the company delivered earnings of $3.79 per share, which came out a lot better than the $2.72 expected by analysts. The leading Bank is expected to deliver its 1st quarter earnings results on the 14th of April and the expectations are for $2.81 per share, while it delivered only $0.78 per share in the same quarter of last year. In other words, in case of a better report than expected we would expect to see the share price rise quickly after the event and that would give us a chance to make high profits to the upside afterwards.


Technical analysis

JPM has been in a massive uptrend since March last year. The stock has gained over 119% in 12 months. In the past few weeks the price has been consolidating between the $160 resistance and the $147 support. After the recent profit-taking correction from $160 the price tested the strong support at $147 and has been failing to break it for 1.5 months now. In other words, the price has been facing lots of buying pressure at that key support mark and bulls haven’t really let the price go lower than that level.

Moreover, we are expecting to see more buying pressure in the next week ahead of the earnings report on the 14th of April when JPM would be announcing its Q1 financial results.

Based on the company’s strong financial positioning and overall performance, we believe it is likely that JPM would report a strong figure again and in case it comes out better than expected, the share price could make another strong bullish rally to the upside after the report and that would give us a chance to make high profits on the way up.

The lower Bollinger band matches perfectly with the horizontal and the diagonal support marks that stand at that $147 level. Moreover, the 50-day moving average is right below the key support at that point, giving further bullish indications.

If we look at the Stochastics indicator we could see that it is very close to the oversold territory and is already crossing up, giving further buying signals.

Overall, we believe the downside is very limited compared to the upside potential on the stock especially in case of a stronger than expected earnings result.

Therefore, we remain strongly bullish on the stock and believe the right time has come to buy JPM ahead of the earnings season and benefit from a very likely further bullish rally in the next few weeks.


Chart: JPM

We will start buying the stock at around $148-$149, right above the key support mark at $147. In case the price drops further and breaks the first support, we would be interested in adding some more to our long positions at the next key support at $141 where more buying pressure is expected. Our initial profit-taking target is set at $160-$163, followed by the next target at $170-$175, where we would be fully cashing in our profits.




Home Depot (HD)

Our first stock from the XLY for April is Home Depot (HD).


Company background and financial performance

Headquartered in the US, Home Depot (HD) is the largest home improvement retailer in the world. The company operates through almost 2,300 retail stores across the globe. Its diverse range of branded products include home improvement items, building materials, lawn and garden products, décor products and other related services.

Home Depot has outperformed the industry in the past year, driven by its fundamental strength and strong financial performance, as well as market positioning. In fact, sales and profits have been growing steadily and have been beating analysts’ quarterly earnings expectations, making more money for its shareholders. The company has seen a continued strong demand for its home improvement products in the past few quarters during the pandemic and that has been essential for its overall financial performance.

Moreover, the company’s diversified portfolio of products being sold in different geographies have led to an increase in sales and profits as well. Overall, the company’s great financial performance and market positioning has allowed it to deliver solid financial results in the past few quarters even during the pandemic times and that has been extremely beneficial for shareholders who have been making high profits on the stock to the upside.

Home Depot is expected to deliver its Q2 financial results for the quarter ending in April and the expectations are for $2.82, while it delivered $2.08 in the same quarter last year.
Any reading better than the expectations would be seen as a bullish indication and we would be interested in adding the stock to our portfolio in order to maximize our profitability on the way up.


Technical analysis

By looking at the HD stock, we shall say it has been one of the best performing stocks during the pandemic in the past year. The share price has grown from the $137 lows in March 2020 to the current highs at $315 (130%). In fact, currently the stock is extremely bullish and keeps on heading higher on expectations for another strong financial results reported by the company next month. In other words, investors and traders are currently buying the stock on expectations that HD would beat analysts’ expectations next month and that’s what’s driving the stock so high at the moment.

By looking at the chart, one could see the strong support (broken resistance) at $290 where lots of buying pressure is expected. The middle Bollinger band matches with the strong support at that point, while the 50-day moving average is right below that point at around 280 – all signaling a potential increased buying activity at that price.

Furthermore, the technical indicators have already gone to the overbought territory and we believe it is likely to see some profit-taking interest soon before the stock starts rising again ahead of the earnings report next month. We are not so keen to buy right now as the price is heavily overbought and would rather prefer to wait for a little correction before we start opening our long positions on the stock. Yet, once it gets closer to that strong support mark at $290 we would certainly be interested in buying the stock before the earnings report in order to maximize our profitability to the upside.


Chart: HD

We will start buying the stock at around $295, right above the support at $290. In case the price drops further before the earnings report, we would be interested in adding more to our buy positions at the next strong support at $270 that would give us a chance to get a better average price on the stock and further maximize our profitability to the upside. Our initial profit-taking target would be set at $310-$315, followed by the next target at $330-$335 where we would be fully closing our positions and collecting profits.





Sincerely,

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