Blame it on the Whale?

JP Morgan’s stock lost 9% between May 10 and May 11. This, of course, was when Jamie Dimon first announced the $2 billion (and counting) trading loss attributed to the now infamous “London Whale.”

That’s the dramatic – “you couldn’t write a better script” – story.

The somewhat less sexy story is that JP Morgan’s stock was tapped out, even before the trading loss was revealed. Let me walk you through how JPM traded before the headline selloff…

1) The Money Flow Index bottomed twice in August and September of last year, showing sellers were exhausted. Then, JPM’s stock price double-bottomed a couple months later.

2) After JPM found support at $30, the Money Flow Index hit a two-year high. This “kick started” the move higher as new buyers fueled the rally. Between November and March, JPM’s stock gained an impressive 65%.

See larger image

3) Then, by the end of March, the Money Flow Index again hit a maximum value. This time, the Money Flow Index showed buyers were exhausted. With no more buying interest, JPM fell 12% in a month.

4) Finally, on May 10, JPM announced the trading loss. That created the “gap down” between the close on May 10 and the open on May 11. The stock has continued to slide and is now down 28% since the end of March.

Feeling a case of Déjà vu? This is the same Money Flow Index pattern I saw in Bank of America about a month ago. I highlighted the action in the April 24 issue of Survive & Prosper.

The selloff in JPM seems to be halted for now. But we’ll continue to see ripples from the bank’s sunken whale for weeks to come.

If you haven’t done so already read the Survive & Prosper issue on “We’ve Been Warning Since Last August That The Banking Sector Is In Trouble.”

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Categories: Economy

About Author

Adam O'Dell has one purpose in mind: to find and bring to subscribers investment opportunities that return the maximum profit with the minimum risk. Adam has worked as a Prop Trader for a spot Forex firm. While there, he learned the fundamentals of trading in the world’s largest market. He excelled at trading the volatile currency markets by seeking out low-risk entry points for trades with high profit potential. An MBA graduate and Affiliate Member of the Market Technicians Association, Adam is a lifelong student of the markets. He is editor of our hugely successful trading service, Cycle 9 Alert.

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