Is JPMorgan Chase Well-Positioned for the Future?

With shares of JPMorgan Chase & Co. (NYSE:JPM) trading around $57, is JPM an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

JPMorgan Chase is a financial holding company that provides various financial services worldwide. The company is engaged in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing, asset management, and private equity. Financial services companies like JPMorgan Chase are essential for well-functioning economies around the world.

The global pool of prized rainmakers shrank further on Tuesday after one of JPMorgan Chase's longest-serving deal bankers said he would retire. Klaus Diederichs, a 34-year veteran of JPMorgan and a brand-name adviser during several merger booms, is stepping down as Chair of European investment banking in April. The German-born banker joined JPMorgan straight out of university in 1980 and has held several senior leadership roles in his time with the bank, most recently the head of investment banking for Europe, Middle East and Africa.

A traditional relationship banker, Mr Diederichs helped establish JPMorgan's European deals and advisory business in the early 1990s, hiring bankers just as rivals were cutting back and competing with leading London corporate finance houses SG Warburg and Morgan Grenfell. To compete with what were then better-known European advisers, he staffed the JPMorgan team with pan-European specialists. The bank is highly regarded by its rivals for the way it has translated existing corporate relationships into financial advisory mandates. He also persuaded some of the continent's more-conservative companies to hire JPMorgan for external merger advice.

T = Technicals on the Stock Chart Are Strong

JPMorgan Chase stock has done relatively well in the past couple of years. However, the stock is currently trading sideways and may need time to consolidate. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, JPMorgan Chase is trading above its rising key averages which signal neutral to bullish price action in the near-term.

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of JPMorgan Chase options may help determine if investors are bullish, neutral, or bearish.

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
JPMorgan Chase options	18.05%	3%	0%

What does this mean? This means that investors or traders are buying a small amount of call and put options contracts, as compared to the last 30 and 90 trading days.

	Put IV Skew	Call IV Skew
February Options	Flat	Average
March Options	Flat	Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a small amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Mixed Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on JPMorgan Chase’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for JPMorgan Chase look like and more importantly, how did the markets like these numbers?

	2013 Q4	2013 Q3	2013 Q2	2013 Q1
Earnings Growth (Y-O-Y)	-6.47%	-112.14%	32.23%	33.61%
Revenue Growth (Y-O-Y)	-7.02%	-7.67%	13.67%	-3.57%
Earnings Reaction	0.06%	-0.01%	-0.30%	-0.60%

JPMorgan Chase has seen mixed earnings and decreasing revenue figures over the last four quarters. From these numbers, the markets have had mixed feelings about JPMorgan Chase’s recent earnings announcements.

P = Weak Relative Performance Versus Peers and Sector

How has JPMorgan Chase stock done relative to its peers, Bank of America (NYSE:BAC), Citigroup (NYSE:C), Wells Fargo (NYSE:WFC), and sector?

	JPMorgan Chase	Bank of America	Citigroup	Wells Fargo	Sector
Year-to-Date Return	-1.17%	9.60%	-0.21%	2.49%	3.67%

JPMorgan Chase has been a poor relative performer, year-to-date.

Conclusion

JPMorgan Chase is a bellwether in the banking space that forms an essential part of the United States financial system. Klaus Diederichs, the company’s Chair of European investment banking, is stepping down in April. The stock has done relatively well in recent months, but is currently trading sideways. Over the last four quarters, earnings have been mixed while revenues have been decreasing which has produced mixed feelings among investors. Relative to its peers and sector, JPMorgan Chase has been a poor year-to-date performer. WAIT AND SEE what JPMorgan Chase does this quarter.