Bank of America Corp (BAC) Stock: The Best Place to Buy This Plunge

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bac stock - Bank of America Corp (BAC) Stock: The Best Place to Buy This Plunge

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Tuesday was a rough one for the stock market, and depending on the sector, it was downright ugly. Case in point, financial stocks dropped hard, with large-cap banks such as Bank of America Corp (NYSE:BAC) and Wells Fargo & Co (NYSE:WFC) marking their respective charts with big red candles (down days). For its part, BAC stock dropped a cool 5.8%, snapping plenty of near-term technical support along the way and shaking out lots of weak hands and quick-hitter traders.

Beat the Bell: Bank of America Corp (BAC) stockWhereto from here, you ask? From a structural perspective, Bank of America stock may just be a buy once more, and soon.

When I last offered a trade idea on BAC stock on Feb. 6, I said that while the stock remains overbought through a multimonth lens, in the near-term, it could rally toward $25 if a break above $23.50 could stick. One week later, BofA broke past technical resistance, and by early March, my $25 price target had been reached.

To gain some much needed perspective, let’s start today’s analysis with a ratio chart where I divided the financial sector as represented by the Financial Select Sector SPDR Fund (NYSEARCA:XLF) by the S&P 500, as represented by the popular SPDR S&P 500 ETF Trust (NYSEARCA:SPY).

XLF vs SPY
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On this chart, we see that the financial sector is still badly lagging versus the broader large-cap stocks since the financial crisis from 2008-09. At the same time, the relative chart has made a series of higher lows since the 2009 absolute and relative lows. As a result of the rally over the past few months, financial stocks have broken past both diagonal resistance (red dotted line) as well as horizontal resistance (blue horizontal line).

Thus far, Tuesday’s weakness in the financial sector has merely begun a retracement back to horizontal support (i.e., former resistance), which is to say that financials’ relative strength through a multimonth lens remains intact.

BAC Stock Charts

On the multi-year weekly chart, we see that the recent sharp multimonth rally following the U.S. election results cleanly broke the stock past horizontal resistance around the $18 mark, which has since turned the 50-, 100- and 200-week simple moving averages back up.

BAC stock chart weekly view
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However, note how far price still remains above these moving averages, which at the margin begs for some sort of a pause in the rally in BAC stock.

On the daily chart, we see that while upside momentum in Bank of America — represented by the MACD indicator at the bottom of the chart — topped last December, the stock continued to climb in February and into early March as momentum made a lower high.

BAC stock chart daily view
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As a result of Tuesday’s drop, BAC stock has now arrived back at the $23 area, which from December through early February acted as resistance. From that perspective, Bank of America has so far merely retraced a breakout move.

Regardless, traders and investors alike looking to buy banks such as BAC stock once again would be wise to first wait for bullish reversals (a strong buying day) to manifest. In the case of BofA, the support area where you should look for a bullish reversal to come to fruition is between $22 and $23.

That ultimately could lead to a move back to the mid-$20s as a first upside target, followed by the high $20s or even low $30s.

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Article printed from InvestorPlace Media, https://investorplace.com/2017/03/bank-of-america-corp-bac-stock-best-place-buy-dip/.

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