Before the bell Wednesday, Bank of America (BAC) served up its latest earnings report for investors. And a bullish report — as well as a strong technical picture — bode well for Bank of America stock.
BAC earnings for Q3 came in at $2.5 billion, which is a significant improvement from the $340 million it made in the same quarter one year ago. BofA also reported earnings per share of 20 cents, thus beating analysts’ estimates by a penny.
Bank of America reported a solid 32% increase in profit in its largest unit — retail banking. BAC issued more than 1 million credit cards in the quarter, which is the most in any quarter since 2008, signaling the bank is somewhat more prone to issue credit. Progress was made on the cost-cutting side as well, as BofA’s costs were lower by $1.16 billion in the quarter. BAC has a goal of saving $1.5 billion each quarter.
Bank of America stock took all of this news rather well.
BAC closed Wednesday’s trading higher by 2.25% in what continues to look like one of the technically strongest stocks on my watch list, with the time-frame of a couple of months.
The weekly chart of BAC shows much to like both in terms of the stock’s support as well as the resistance points it needs to overcome.
Off its December 2011 lows, Bank of America stock rallied more than 200% into its year-to-date highs in July. However, the rally has been nothing but orderly, with the exception of the steep rally in Q1 2012.
Since July 2012 and in conjunction with an important support level in the broader market, Bank of America stock has been bought on every dip, to the extent that BAC showed much of any “dipping” since then. Strong as a mule, the stock pushed higher and since its July highs has consolidated, readying what looks to be its next move higher. The July highs coincide with BAC’s January 2011 highs roughly around the $15 area — a break above which could lift the stock toward the $18-$20 area.
On the daily chart, this bullish, now three-month-old consolidation phase looks like it is coiling Bank of America stock up for a spring higher.
The entire consolidation zone also might be looked at as a bull flag formation, a break out of which has a clear and first price target for BAC near the $18 level.
Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free Weekly Market Outlook Video here. As of this writing, he did not hold a position in any of the aforementioned securities.