Bank of America Corp (NYSE:BAC) has mustered a 3.5% gain so far on Monday, and with just a quick look at the headlines, it’d be easy to doubt there will be any follow-through buying. While a fortuitous outcome in France’s presidential election bodes relatively well for BAC stock — in that BofA has a respectable amount of exposure to the European market — at the end of the day, the party in power in Paris doesn’t inherently bolster the bottom line.
On the other hand, sometimes a stock just needs the right nudge to reach the price it deserves to be trading it.
Thanks to Monday’s bump, BAC stock has cleared a key technical hurdle that clears the decks for more gains.
The News Investors Cared About
As a refresher, Bank of America posted blowout first-quarter numbers. The company earned 41 cents per share on $22.2 billion in revenue, versus expectations for a profit of only 35 cents per share of BAC stock and sales of $21.6 billion. Even more impressive was the bottom line’s year-over-year growth of 46%, and top-line growth of 12.5%.
The numbers were a strong affirmation that BofA is very much on the right track, having shrugged off the worst of bad loans to the energy sector. The subprime debacle (and fallout) is now only a fading memory.
And yet, considering BAC stock had fallen 13% from its March high heading into earnings — suggesting traders weren’t terribly optimistic — the post-earnings response from BofA shares felt lacking. The effort stalled just as soon as resistance was met at the stock’s 20-day moving average, limiting the post-announcement gain to less than 4%.
For whatever reason, though, investors interpreted news from France’s political scene as a big reason to buy U.S.-based banks, even as their solid earnings reports weren’t a bullish prod. Broadly speaking, investors have been simply more concerned that the non-establishment candidate would mark the beginning of the end of the European Union now that the United Kingdom is out. Such a disruption poses a threat to all the big banks’ business overseas.
Now that threat has been at least partially abated.
BAC Stock Shoots Above Resistance
While the response to the news from Bank of America is fundamentally a bullish one, the dramatic change for the better is a technical one: BofA’s chart just cleared a key hurdle. That is, the 20-day moving average line (blue) that had been holding the stock back was cleared thanks to today’s strength.
It wasn’t just a move above a key line in the sand, however, that makes this thrust such a high-potential one. There’s also the bullish foundation it’s built on.