Bank stocks have rallied in recent weeks, as traders expect tax reform and rate hikes from the Fed to boost the sector. With the central bank ready to announce its next policy decision this afternoon, brokerage firm KBW this morning revised its outlook on a number of financial names, including Dow components JPMorgan Chase & Co. (NYSE:JPM) and Goldman Sachs Group Inc (NYSE:GS). Below we'll take a closer look at JPM and GS.
For JPMorgan Chase stock, KBW upped its price target to $116 from $102, but the shares were last seen 0.3% lower at $106.47. The equity touched a record high of $108.40 on Dec. 4 and sports a year-to-date gain of greater than 23%. In fact, JPM had a 14-day Relative Strength Index (RSI) of 70 coming into today, meaning it was technically overbought and due for a breather.
Still, options traders have remained bullish. The security has a 10-day call/put volume ratio of 2.32 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Not only does this show call buying has more than doubled put buying in recent weeks, but it ranks in the high 88th annual percentile, meaning such a demand for long calls over puts is rare.
Turning back to analysts, though, most are actually bearish on the bank stock, despite its impressive performance on the charts and bullish expectations across Wall Street. By the numbers, 11 of the 18 brokerage firms tracking the shares say they're just a "hold," and JPM is now trading above its average 12-month price target of $101.50.
Goldman Sachs stock is only fractionally highertoday, last seen trading up 0.2%at $258.20, even though KBW upped its price target to $260 from $240. Still, the shares managed to touch a record high out of the gate at $258.32, and sport a year-to-date lead of 7.6%. But like its sector peer, GS was overbought coming into today, according to its 14-day RSI of 72.
Another similarity is that Goldman options traders have been bullish across the ISE, CBOE, and PHLX. The equity's 10-day call/put volume ratio during this time comes in at 1.86, and ranks in the 74th annual percentile.
Yet analysts are mostly skeptical. Of the 18 brokerage firms in coverage, nine have handed out "hold" ratings, while another considers Goldman Sachs a "strong sell." Moreover, the Dow stock has surpassed its consensus 12-month price target of $251.60.