This Bank of America Corp (BAC) Stock Rally Isn’t Just a Fad

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Bank of America Corp (NYSE:BAC) has been on a spectacular run since the election, climbing as much as 37% to hit an eight-year high of $23.29 on Wednesday. That said, BAC stock has been consolidating its gains over the last few days.

And while I’m confident higher prices are in the future for both the broad banking sector and BofA in general, I’m not convinced that now is the right time to buy.

I’ll explain why shortly, but first let me explain why I’m bullish on Bank of America stock over the long-term.

BofA’s big move to the upside began with a spike in volume the week of the election (circled in orange in the chart below). Volume has remained above average as the shares rallied, only dipping back below average amid periods of consolidation. That’s very bullish action, and shows that the buyers are definitely in control of BAC stock here.

This Bank of America Corp (BAC) Stock Rally Isn't Just a Fad

As a result of the parabolic rally, I don’t think chasing and buying this stock near its highs is the best strategy. Now that we know the Federal Reserve is hiking rates for the second time in a decade, I’d look for weakness in the following days and weeks. BAC could pull back to price support around $20.50-$21.50, which would create a buying opportunity.

I believe the rate hike was largely priced into the market, which is why neither the market nor the stock moved much in the hours following, but Federal Reserve Chairwoman Janet Yellen also said the central bank would look to raise interest rates three more times over the next year.

That would be good for Bank of America over the long-term; however, it’s important to keep in mind that the Fed doesn’t always follow its plan.

Regardless, the odds of BAC pulling back some time in the next week or two are high after such a strong rally.

That weakness should be viewed as a buying opportunity for the longer-term.

Matthew McCall is founder and president of Penn Financial Group, an investment advisory firm. Matt also is Editor of FUTR Stocks and the ETF Bulletin. Earlier this year, Matt and Hilary Kramer teamed up on Breakout Stocks where Matt serves as the Co-Editor. Most recently, Matt and Hilary joined forces again. This time, they are helping individual investors make money trading ETFs. For more on their latest project, visit www.etfedgesummit.com.


Article printed from InvestorPlace Media, https://investorplace.com/moneywire/2016/12/bank-america-corp-bac-stock-rally-fad/.

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