Banks are in the middle of their earnings reporting season, and yesterday Bank of America (BAC) was at bat. The result? A solid liner down the right-field line that sent BAC stock up a decent 2%-plus.
For the fourth quarter, Bank of America earnings came to 29 cents per share, 3 cents better than the analyst consensus. Revenues were $21.7 billion, also better than the $21.24 billion expected by Wall Street.
Other highlights included net interest income, which rose 4% to $10.79 billion, partially due to lower rates that the bank paid on deposits. Credit quality of the bank’s customers also improved as fewer costumers failed to make their loan payments. At the same time, BAC increased total loans by about 4%. Last but not least, the bank further cut expenses — an area that many analysts have focused on in recent years — to the tune of 6% in the fourth quarter.
BAC stock finished up 2.27%, helping not only the entire financial sector a boost (financials were the second-best sector in the S&P 500 on Wednesday), but also lending a hand to the overall market.
For reference as well as transparency purposes, since I last discussed the charts of BAC stock on Nov. 12, the bullish picture that I pointed to at the time has played out and led to more technical resistance levels being broken.
So, when we look at the below multiyear, weekly logarithmic chart, which stretches back to the wild gyrations of the financial crisis, we see a stock that marches an orderly ascent. Particularly during the news-filled earnings season, it is imperative that one has a firm handle on the many time frames of any given stock or asset, for only then can we determine whether the near-term price action changes anything in the grander scheme of things.
In November, BAC stock managed to break past the resistance zone around the $15.20 mark, which has acted as resistance since July 2010. In the same time frame, this then opened up BofA to work toward the next higher layer of resistance around the $19 level, which is exactly what it is doing at present.
On the daily chart, BAC stock’s orderly incline continues, and yesterday’s post-earnings pop led to a textbook breakout from a bull flag pattern.
There isn’t much bearish price action to contemplate over, which over the years has taught me to favor the side of the trend, and that clearly is up. The aforementioned next layer of resistance at $19 will act as a magnet of attraction, and until such time that bearish reversals appear on the daily chart, this stock looks poised to rise.
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Learn more about the strategies Serge Berger uses to create profits in the market every day. Download his trading plan in the Essence of Swing Trading e-book by clicking here. As of this writing, he did not hold a position in any of the aforementioned securities.
