JP Morgan Gives the Banks a Direction

JP Morgan Chase (JPM) today before the bell beat earnings estimates and reported a quarterly profit of $3.3 billion or 74 cents a share, compared with $2.1 billion or 40 cents a share, a year earlier.  Being the first bank to report many people were looking for JPM to set the tone for what to expect from the other major banks, when they report later in the earnings season. 

Coming into the day today your game plan had to include a few of the financials.  As a firm we have been watching Wells Fargo(WFC), Bank of America(BAC), Suntrust Banks Inc(STI), and Morgan Stanley(MS).  These banks were already showing strength on the charts since around February and this earnings report on JPM had to get you excited going into the day.  Now I don’t know what these banks are going to report and I don’t care.  The only thing I care about is the price action on these banks as their earnings approach. 

By looking at today’s price action in many of the banks it seems most people are expecting the other banks to outperform as well with their earnings.  It seemed today institutions were establishing positions in the banking sector today across the board.  As individual traders this is the type of price action we are looking for.  When the financial sector is in play this can make your month. 

Many institutions are looking at the other banks for confirmation that the recession is over and that the economy is improving.  Watch earnings in BAC on Friday and Citi on Monday to see if this trend continues or if they disappoint look for a big sell-off that will buck the trend.  Good luck in your trading. 

Kyle

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