BAC Stock: Bank of America’s Bull Case Is Back!

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Bank of America Corp (NYSE:BAC) stock took a breather last week after a strong start to the month of June. But with Monday’s broad-market rally — sponsored at least in good part by Greece — BAC stock popped and now looks ready to move higher again.

beatthebell_185x185Better yet: Active investors and traders also now have well-defined risk at last week’s lows that they can use in planning a trade.

On June 3, I shared a trade idea on Bank of America, which hit its price target a few trading days later. Because the bigger picture underpinning the bullish call for banking stocks in the near-term remains the same, let’s review.

The first chart I discussed on June 3 showed the relative strength of the banking stocks versus the broader market, as represented by the S&P 500. Below, I updated this ratio chart, where I divided the KBW Bank Index by the S&P 500. At the time, the ratio stood at the blue box on the chart and has since exploded higher, breaking past diagonal resistance (black line).

BKX SPX
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Next, I showed the multiyear weekly chart of BAC stock, which showed it in the middle of a more than twelve-month range, which argued that a revisit of the upper end of this channel was likely. As a result of the ensuing rally, BofA shares did get much closer to the upper end of the range, but haven’t yet touched it entirely.

In other words, at least through this lens, a little further upside looks likely.

BAC weekly chart
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Next, I looked at the relative picture of BAC stock versus the banking stocks as a group and noticed further relative strength by BofA there too. This relative strength continues, but it did take a rest last week, back to the horizontal line of support.

This is a constructive nap for now, though, and supports my thesis that BAC could have one more run higher left in it.

BAC BKX
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Finally, on the daily chart of BAC stock, we see that the bull flag pattern that I discussed on June 3 — which at the time took place at the red dotted horizontal line of resistance — has since given way to higher prices. Thus, my initial $17.50 price target was reached on June 10. As a result of the pause last week, BAC stock has built a next bull flag pattern, all the while holding above its yellow 21-day simple moving average.

BAC daily

From here, active investors and traders could again look to buy BAC stock around the $17.50 mark, for an initial move toward $18 and possibly $18.50.

As always, any sharp bearish reversal would call off the near-term bullish setup.

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Successful trading and investing starts with a plan. Download Serge’s essential trading plan, TheEssence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/06/bac-stock-bofa-bull-case/.

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