Is JPMorgan Chase & Co. (JPM) on the Brink of a Breakout?

JPMorgan Chase & Co. (JPM) has historically outperformed in September

by Alex Eppstein

Published on Sep 2, 2016 at 11:45 AM
Updated on Jun 24, 2020 at 10:16 AM

JPMorgan Chase & Co. (NYSE:JPM) is up 0.5% at $67.54 amid dimming rate-hike expectations, and has been stair-stepping higher for most of 2016. Since bottoming in early February, the bank stock has advanced a brow-raising 28.6%. And, from the looks of it, history is hinting at a near-term breakout for the shares.

Earlier this week, we took a look at the best stocks to own in September. Sure enough, JPM is on the list. The bank stock has been positive in eight of the past 10 Septembers, and on average, has gained over 2% during the month. A repeat performance would put the shares on the doorstep of their early November annual high, at $69.03.

With JPM trekking steadily higher in recent months, it comes as no surprise that options players have been buying to open calls over puts. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open 1.35 calls for every put during the past two weeks -- a ratio that outstrips two-thirds of all others from the past year.

Now seems to be a near-perfect time to purchase premium on short-term JPM options, too. Earlier, the stock's 30-day at-the-money implied volatility fell to an annual low of 14.9%. On top of that, the bank stock's Schaeffer's Volatility Index (SVI) of 17% rests in the bottom 9% of all readings from the past year, hinting at relatively muted short-term volatility expectations.

A couple of other factors could lift JPMorgan Chase & Co. (NYSE:JPM) shares, too, from a contrarian point of view. First, seven analysts still rate the bank stock a "hold" or worse, leaving room for potential upgrades. Second, short interest climbed nearly 26% to 31.7 million shares during the most recent reporting period, meaning there's sideline cash available for a possible short-squeeze situation.

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