Bank of America Corp (BAC) Gets a Hand You Can Trust

Shares of Bank of America Corp (NYSE:BAC), along with other U.S. banking stocks, rallied on Tuesday as the broader market lifted on the back of what many called a win by Hillary Clinton in the first presidential debate. This rally in BAC stock also took place at a technical confluence area of support that traders could use to play BofA from the long side.

When I last opined on Bank of America stock on Sept. 1, I said that after the extensive rally off the late-June lows, the stock is overdue for a pause. Since BAC stock has now paused for the better part of the past month, however, traders should once again find better levels for some long trades.

Before looking at the charts, while Bank of America stock at this juncture may well present a interesting trading opportunity, the system still has plenty of systemic risk. Just look toward the derivatives exposure of Deutsche Bank AG (USA) (NYSE:DB) or the ongoing saga at Wells Fargo & Co (NYSE:WFC) over unauthorized account openings, the ultra-low-interest-rate environment and more.

BAC Stock Charts

Moving on to the charts, we see that despite Bank of America’s impressive rally off the February lows, BAC still is struggling to wiggle into a more promising-looking longer-term spot from a technical perspective. Note that the former support line (black) in August once again held as resistance. Furthermore, the yellow 50-week moving average still trades well below the blue 100-week moving average, which at the margin still confirms an intermediate term downtrend or at best case an intermediate-term sideways move.

From this angle, BAC stock would be a better buy if and when it could overcome the $16 area on at least a daily (but preferably on a weekly) closing basis.

Bank of America BAC stock chart weekly
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However, since trading and investing is all about time-frames and risk management, let’s note what the current picture for BAC stock looks like on the daily time frames.

On Sept. 1, I said that while at the time the stock looked to be overbought, “Bank of America might be a buy again when it’s closer to the $15 area.” In Tuesday’s trading session, BAC stock briefly dipped below the $15 area, but by the end of the day, a notable bullish reversal took place.

This reversal at least for the near-term is now confirming the $15 area as respect-worthy technical support. Also note that the $15 area also coincides with previous technical resistance (horizontal line) and that after Tuesday’s bounce BAC stock also managed to hold its yellow 50-day moving average as support.

Bank of America BAC stock chart daily
Click to Enlarge

For now, traders could thus use Monday’s intraday lows below $15 as a stop-loss to trade BAC against on the long side, using the $16 area as a first upside price target.

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