JPMorgan Chase & Co., Goldman Sachs Group Inc Bulls Active as Stocks Flex Muscle

JPMorgan Chase & Co. (JPM) and Goldman Sachs Group Inc (GS) rallies have short-term call buyers on the prowl

by Alex Eppstein

Published on Jan 14, 2016 at 11:44 AM

It's been a big day for blue-chip banks. Specifically, financial titans JPMorgan Chase & Co. (NYSE:JPM) and Goldman Sachs Group Inc (NYSE:GS) are flexing their muscle on the charts amid the latest headlines. Here's a closer look at the news sending JPM and GS higher, and how option traders are reacting.

JPM is up 3% at $59.05, after the company's fourth-quarter results topped estimates. This is a much-needed boost for a stock that had lost 13.2% year-to-date heading into today's session, and should lift the spirit of option bulls.

During the past two weeks across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), JPM has amassed a call/put volume ratio of 1.73, with long calls easily outstripping puts. What's more, this ratio ranks in the high 82nd percentile of its annual range. Today, in fact, buy-to-open activity is detected at the in-the-money January 2016 56.50-strike call, as traders wager on further gains by week's end.

This optimism extends to the analyst community. Specifically, 13 of 16 brokerages have dubbed JPMorgan Chase & Co. worthy of a "buy" or better rating -- with not a single "sell" opinion to be found. Along similar lines, the stock's consensus 12-month price target of $72.63 stands in a record-high territory.

Turning our attention to GS, the stock is currently up 1.8% at $161.81, despite earlier hitting an annual low of $156.76. Wall Street is apparently responding positively to last night's announcement that the financial firm may cut up to 10% of its fixed-income division, or roughly 250 employees, according to The Wall Street Journal.

On the charts, it appears GS has found a foothold near its 200-week moving average, as well. This should encourage shareholders, who have watched the stock drop 19% since its most recent high of $199.90 in early November.

Option traders are responding positively to the bounce. Intraday call volume is running at 1.8 times the norm, and the weekly 1/22 170 strike is seeing buy-to-open activity. It looks like these buyers are expecting GS to extend its gains through next Friday's close, when the weekly series expires. Ahead of expiration, the company will report earnings the morning of Wednesday, Jan. 20, which could serve as a catalyst.

Longer term, call buying has been all the rage among Goldman Sachs Group Inc speculators. The stock's 50-day ISE/CBOE/PHLX call/put volume ratio of 2.38 ranks just 4 percentage points from an annual peak. Plus, the equity's Schaeffer's put/call open interest ratio (SOIR) sits at 0.68, below 99% of comparable readings taken in the past year.

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