JP Morgan Beats London Whale

<p>JP Morgan’s Q3 results showed +34% year-on-year increase in earnings to $5.71 billion or $1.40 a share vs expected $1.19, with revenues rose 6.1% to […]</p>

JP Morgan’s Q3 results showed +34% year-on-year increase in earnings to $5.71 billion or $1.40 a share vs expected $1.19, with revenues rose 6.1% to $29.86 billion vs the expected $24.5 billion.

Mortgage loan originations rose 29% from last year and up 8% from Q2. As the gift of ultra low interest rates from the Fed keeps on giving, JPM’s mortgage writing will likely offset loan loss reserves, which fell by $900 million. The infamous “London whale” trades led to $449 million in losses.

Looking ahead, JPM’s increasing focus to the recovering US housing market suggests a potential retest of the $47 price handle is realistic as long as the Fed maintains its QE3 program into at least June 2013. And with US housing recovering 43% and 36% in existing and new home sales respectively from their 2010 double dip, further housing-driven impact for the bank is viable with ongoing policy accommodation from the Fed.

Weekly technicals show a narrowing bullish triangle, boosted by consolidating stochastics, which increase the probability of a breakout over time — as backed by more durable “monthly” momentum foundation. The converging multi-speed stochastic metrics on the monthly chart and the renewed break above the 200-month moving average set up for a run-up to the 45-trendline resistance. Long term technicals suggest a break of the trendline cannot be ruled out, in which case, $52.00 could may well stand as the subsequent target.

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