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By: Brendan Gilmartin

JPMorgan Chase (JPM) is scheduled to report 4Q 2012 earnings before the bell on Wednesday, January 16. The results are typically released at 7:00 a.m. EST with a conference call slated to follow at 8:30 a.m. JPMorgan Chase is the second among the major U.S. financial institutions to report quarterly results (Wells Fargo (WFC) reports on January 11). Therefore, the numbers could have a significant impact in the trading of other names in the financial sector, as well as U.S. index futures and other broad market securities.

Outliers And Strategy

JP Morgan Chase is expected to earn $1.20 per share (range is $0.95 - $1.35) on revenue of $24.46 bln, up 10.2% from the prior-year period. (Source: Yahoo Finance).

At a recent $46.15, JPMorgan Chase is now trading at a mere 9.65x trailing earnings, well below the 5-year average. The shares are also trading at a slight discount to book value of $50.17 (as of 09/30/2012).

Recent News

  • 01/04: Goldman Sachs removed JPMorgan Chase from the Conviction Buy List in favor of names in the banking space with more restructuring upside, according to a post on StreetInsider.com. However, the firm maintains JPMorgan Chase is a top-notch franchise with EPS upside, reiterated a Buy rating, and increased the price target from $50 to $52.
  • 01/03: Sterne Agee upgraded JPMorgan Chase from Neutral to Buy and raised the price target from $47 to $51, according to a post on Benzinga.com. The firm cited resilience in the corporate and middle-market lending environment, along with a pickup in mortgage banking and better credit quality. Other factors for the upgrade reportedly include the strong balance sheet, solid management team, and leading market position.
  • 12/11: JP Morgan declared a quarterly dividend of $0.30 per share on the outstanding shares of the corporation's common stock. The current yield is 2.64%.


Technical Review

JPMorgan Chase shares are at levels not seen since early 2011 and up close to 18% since mid-November. At $46.15, the shares are in a long-term resistance area between $45 and $50 - levels going back more than five years. Furthermore, the momentum oscillators are registering steep over-bought conditions, with the Relative Strength Index (RSI) near 75 (readings above the 70-level are considered overbought). With that said, look for JPMorgan to deliver earnings at or above the high end of consensus estimates. Anything less may trigger a pullback toward $44 support, with downside risk to $43.00 and the 50-day SMA near $42.00. (Chart courtesy of StockCharts.com)

Summary

JPMorgan Chase shares are near the highest level in close to two years, benefiting from an improving lending backdrop, share repurchases, strengthening economic conditions in North America, a greater appetite for lending, stronger credit quality, and a fortress balance sheet. Given the recent strength and the positive sentiment surrounding JPMorgan, the bar is set quite high this earnings period. In order to push the shares closer to $50, look for earnings closer to $1.35 (consensus is $1.20) per share with a solid revenue figure. Conversely, a disappointing EPS result is likely to spark a pullback in the shares given the sky-high expectations. Also note that results from Wells Fargo on January 11 could impact JPMorgan.

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Source: JPMorgan Chase At Multi-Year Highs Ahead Of 4Q Earnings; Technically Overbought