Last week, shares of JPMorgan Chase & Co (NYSE:JPM) fell below $150 – the lowest they've been since late April. Its Relative Strength Index (RSI) fell below 26 (when it is under 30, a stock is considered to be oversold). RSI is a momentum indicator and tells investors when there has been an excess of buying or selling. In this case, it's the latter. And this is the first time the bank stock has been in oversold territory in the past 12 months.
The reason for selloff can likely be attributed to learning that rate hikes will be coming sooner than expected. That led to a drop in the value of many stocks, including JPMorgan. But rising interest rates are a good sign that the economy is doing well and for banks, they can pocket more of the spread.
Recently, Tim Adams, the chief executive of the Institute of International Finance, told CNBC in an interview that he expects to see "record-level earnings" for banks in 2021. And so while JPMorgan is up 17% year to date, even with this recent selloff, it wouldn't be surprising for it to rally much higher on strong results.
JPMorgan is now trading at 11 times its forward price-to-earnings ratio, which is down from the multiple of more than 13 it was at earlier in the month. With the economy look to be in better shape, JPMorgan looking to be on track for a strong year, and the stock trading at a cheaper price, now may be a great time to add it to your portfolio. Although the stock is down now, I wouldn't expect it to stay that way for long.
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