Shares of Bank of America Corp (NYSE:BAC) on Wednesday Nov. 15 closed higher by nearly 2%. But that only tells half the story of BAC stock, which first had to overcome some early morning weakness.
This made the day’s gain all the more impressive, and traders and active investors would now be wise and watch BAC stock closely for potential bullish trades.
Regular readers of this column are well aware that I have been patiently waiting in recent weeks to buy some banking stocks. With the price consolidation over the past few weeks and pullback last week, followed by Wednesday’s bullish reversal the time seems ripe to at least dip a toe in BAC stock.
Before looking at the charts of BAC stock itself let’s first note the sound technical formation of the KBW Nasdaq Bank Index (INDEXNASDAQ:BKX), of which Bank of America shares are the third-largest holding.
Note that after a sharp rally that started in the fall of 2016, the index began to stall and slip into a multi-quarter sideways consolidation range by February.
As summer turned into fall this year, however, the index once again began to rally and this time broke out of the consolidation range.
Through this lens, the pullback over the past couple of weeks has merely retested the upper end of said range and thus could now slowly lead to a next leg higher.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
BAC Stock Charts
On the multi-year weekly chart, we see that BAC stock looks very similar and thus bullish.
In November 2016 the stock broke past a multi-year line of resistance and then by February 2017 slipped into the aforementioned consolidation range.
The breakout this past September was constructive as was the re-testing of previous technical resistance. Again, all the same as on the BKX chart above.
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
Finally, on the daily chart note that the pullback over the past few days on Wednesday came to a halt right at horizontal support, i.e. previous technical resistance and the upper end of the 2017 multi-quarter sideways consolidation range. This support zone also matched up with the yellow 50-day simple moving average.
The strong bullish reversal on Wednesday, Nov. 15 came in the form of a so-called bullish engulfing candle that engulfed the previous four days worth of price action.
From here traders could get long BAC stock with a first upside target at $28, while respecting any bearish reversal and a last resort stop at $26 on a daily closing basis.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
Check out Anthony Mirhaydari’s Daily Market Outlook for Nov. 16.
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