JPMorgan shares are breaking out, and traders see more upside

The prospect of further rate cuts from the Federal Reserve has not put a stop to a rally in the financials this month, and one banking stock is leading the pack.

J.P. Morgan, the largest U.S. bank, has busted out to new highs this month, while the KBE bank ETF sits below a 2007 peak. Shares of J.P. Morgan have also surged 9% in the past three months, topping other banking stocks Bank of America, Wells Fargo and Citigroup.

Miller Tabak equity strategist Matt Maley said all banking stocks could come under pressure if bond prices work their way higher again.

“Every time the Treasury market gets overbought and starts to pull back — in other words, as prices come down, interest rates go up — the bank stocks start to rally. … We saw that back in April, we saw it in July and then of course we saw it just in the last two weeks. The problem is that each of the previous two cases, the bond market bottomed out and rallied back again, and I think we’re going to see that again,” Maley said Wednesday on CNBC’s “Trading Nation.” 

Even if rates begin to fall and pressure financials, Maley said J.P. Morgan is best in breed and could continue to move higher.

“The KBE bank ETF has not made a new high. The same thing in Bank of America, it’s made a lower high, it’s starting to roll over a little bit, but J.P. Morgan has made a higher high. So if I’m wrong, and the banks start to run, that’s the one that leads the pack. And if I’m right, and the banks pull back a little bit, J.P. Morgan looks the best on the charts and it should look good going forward,” said Maley.

J.P. Morgan also has a fan in Michael Bapis, managing director of Vios Advisors at Rockefeller Capital.

“It’s one of our favorite stocks,” Bapis said on “Trading Nation.” “They are the gold standard of the banking industry. They have a strong leadership team, and they’re benefiting from the tax overhaul. But nobody’s even recognizing that.”

Bapis adds that its strong balance sheet, growing cash reserves and high dividend also makes for an attractive stock. J.P. Morgan yields 3%, above the 2.2% yield of the KBE bank ETF.

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