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How to Trade Bank of America Corp (BAC) Stock After Earnings

You could try to trade BAC stock before its report, but the highest-probability setups come after big events

Bank of America (BAC)

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Shares of large-cap bank stocks such as Bank of America Corp (NYSE:BAC) rallied sharply following America’s presidential election last November. Over the past few weeks, however, BAC stock has largely been stuck in a consolidation phase. The next catalyst for shares? Fourth-quarter earnings on Friday, Jan. 13.

Beat the Bell: Bank of America Corp (NYSE:BAC)Here’s my plan on how to trade Bank of America stock following its report.

When it comes to trading stocks near their respective earnings reports, I have two primary rules:

  1. Never hold trading positions through earnings reports.
  2. Remain open-minded about the possible reactions to any given stock around their earnings report.

I see too many traders (both novice and seasoned) attempt to game earnings reports. Most walk away with little more than a stressful time. While select options trades can make sense through earnings reports, in my nearly 20 years as a trader, I have found much better-probability trades set up on the back of any given report (i.e., once the news is out).

When I last mused about shares of Bank of America on Dec. 5, I offered that BAC stock looked overbought in the near-term and needed at least a pause or pullback to become a better buy into year-end again.

BofA merely ended up consolidating sideways into 2016’s close, so my call to take profits for the time being was a good one.

BAC Stock Charts

On the multiyear weekly chart, we see that the breakout past horizontal resistance around the $19 mark following the November election results was a powerful one.

BAC stock chart weekly view
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Although I believe BAC stock can see plenty more upside in 2017, my concern from this angle is the overbought reading we see from the MACD oscillator at the bottom of the chart. Although Bank of America doesn’t have to fall apart from here as a result of these readings, a continuation higher at the rate we saw in November into December looks very unlikely.

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