Shares of JPMorgan Chase & Co. (JPM) are breaking out based on an analysis of the technical chart, while analysts lift their average price target. It puts JPMorgan on pace to rise about 8% from its current levels to a new record high, and about six times higher than its financial crisis low around $20.
However, despite the optimism for short-term gains, the longer-term outlook for a continued rise may not be sustainable. The significant earnings gains of 2018 may melt away when the calendar rolls over in January, and that may be the most significant headwind facing the stock.
JPMorgan stock is breaking out, based on the technical chart, with the price rising above a multimonth downtrend. That breakout may send shares back to its previous highs around $120, a jump of about 6.5% from the current price around $112.85. The stock had been trending lower since peaking in late January, followed by a decline of about 11%. However, the stock found a healthy level of support around $106.50 at the end of March and then again at the beginning of May, sending the stock on a rebound.
Additionally, the relative strength index (RSI) has started trending higher as well since hitting near oversold levels around 30 in late March. Since that time, the RSI has been steadily trending higher, even when the stock was retesting the lows at the start of May, a bullish divergence. It would suggest that momentum is moving back into the stock. Additionally, with the current RSI level around 56, it still has further to climb before hitting overbought levels around 70.
Analysts have been upping their price targets on JPMorgan with an average price target of about $121, which is up about 16% since the start of the year. However, only 48% of analysts have a buy or outperform rating, while 48% have a hold rating, a mixed outlook.
JPM Price Target data by YCharts
One of the biggest headwinds facing JPMorgan may be slowing earnings and revenue growth in 2019 and 2020. Analysts are forecasting earnings to grow by nearly 31% in 2018, but that growth is seen slowing considerably next year to only 7.6%, and 8% in 2020. Meanwhile, revenue is seen rising by about 9.6% in 2018, slowing to 4% in 2019, and only 2.9% in 2020.
JPM Annual EPS Estimates data by YCharts
JPMorgan appears to have the short-term momentum behind it to send shares higher, but it will need strong fundamentals to keep the stock price rising over the longer term.