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STATISTICS


JPMorgan Chase Enters Bear Market

08/22/11 08:43:53 AM
by Alan R. Northam

Long-term statistical analysis shows a newly established bear market trend for JPMorgan Chase.

Security:   JPM
Position:   N/A

The long-term statistical analysis of the individual securities that make up the Dow Jones Industrial Average (DJIA) shows that six of these securities are currently in long-term primary bear markets to include Bank of America, Cisco Systems, Hewlett-Packard, Microsoft, Wal-Mart, and now JP Morgan Chase has joined the bear club. Let's look at the analysis:

The lower panel of Figure 1 shows the daily price bars of JPMorgan Chase (JPM). This figure also shows the 200-day linear regression trendline (middle green line), the upper and lower two sigma channel lines, and the upper and lower three sigma channel lines. In early June, JPM broke down below the lower two sigma channel line warning of a possible reversal in trend from a long-term uptrend to a long-term downtrend. Between early June and early August, JPM traded between the lower two sigma and the lower three sigma channel lines. Then in early August, JPM broke down below the lower three sigma channel line to signal the reversal in trend.

FIGURE 1: JPM, DAILY. This chart shows the daily price chart of JPMorgan Chase (JPM), in the lower panel along with its upsloping 200-day linear regression trendline and its upper and lower two and three sigma channel lines. The top panel shows the linear regression slope indicator followed by the R-squared indicator.
Graphic provided by: MetaStock.
 
Looking at the linear regression slope indicator in the top panel of Figure 1, note that this indicator is now below its zero line, indicating that the long-term trend is now downward. This indicator crossed below its zero line six trading sessions following the breakdown of the lower three sigma channel line to mark the beginning of a new long-term bear market for JPMorgan Chase. In Figure 2 is plotted the downsloping 200-day linear regression trendline along with its upper and lower two sigma channel lines and shows this new primary bear market trend.

The next lower panel shows the R-squared indicator. This indicator measures the strength of the current trend. Note that this indicator has now moved above its critical level, indicating that there is now a 95% confidence level that this new primary bear market trend will continue. As long as this indicator continues to move upward, the new bear market trend will continue to strengthen.

Figure 2 shows a downsloping 200-day linear regression trendline along with its upper and lower two sigma and three sigma channel lines. Note that the lower two sigma channel line is acting as temporary support, which it should do. As the bear market trend continues to strengthen, price should continue to push through this line of support and move lower. As price continues to move lower, the slope of the linear regression trendline and the upper and lower two and three sigma channel lines will continue to steepen, until which time price stops accelerating downward.

FIGURE 2: JPM, DAILY. This chart shows the daily price chart of JPMorgan Chase (JPM), in the lower panel along with its downsloping 200-day linear regression trendline and its upper and lower two and three sigma channel lines. The top panel shows the linear regression slope indicator followed by the R-squared indicator.
Graphic provided by: MetaStock.
 
In conclusion, this statistical analysis shows that the long-term uptrend for JPMorgan Chase has come to an end and a new long-term downtrend has been established and should stay in motion for some time. As long as the linear regression slope indicator continues to move down and the R-squared indicator continues to move up, the bear market trend for JPM will continue.



Alan R. Northam

Alan Northam lives in the Dallas, Texas area and as an electronic engineer gave him an analytical mind from which he has developed a thorough knowledge of stock market technical analysis. His abilities to analyze the future direction of the stock market has allowed him to successfully trade of his own portfolio over the last 30 years. Mr. Northam is now retired and trading the stock market full time. You can reach him at inquiry@tradersclassroom.com or by visiting his website at http://www.tradersclassroom.com. You can also follow him on Twitter @TradersClassrm.

Garland, Tx
Website: www.tradersclassroom.com
E-mail address: inquiry@tradersclassroom.com

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