Bank of America needs a bounce off $12.30

Aug 30th, 2010 – Comment

  Hi Lou, What do you think? Is Bank of America Corp (NYSE: BAC) a good value at this point, or am I waiting for a deeper discount before I will consider buying some? Vincent   Hi Vincent,   Thanks for the assignment. I recently screened over 60 mid cap U.S. banks for the Trade […]


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BAC LOGO

Hi Lou,

What do you think? Is Bank of America Corp (NYSE: BAC) a good value at this point, or am I waiting for a deeper discount before I will consider buying some?

Vincent

 

Hi Vincent,

 

Thanks for the assignment. I recently screened over 60 mid cap U.S. banks for the Trade By Numbers feature published exclusively on globeinvestor.com, so this is a good chance to look at one of the large caps and see how Bank of America  Corp. ( BAC NYSE) has performed. When we examine the charts it will become evident that the best we can hope for at this point is a bounce off support at $12.30.

  

  bac

The three year chart illustrates the recovery from the March 2009 lows and the resistance at $20.00. BAC is currently in a sell off that started in April of 2010 and is trading below its 50 and 200 day moving averages which puts a caution flag on the track from my perspective. What is visible at this point is that there is a ledge of support in the the $12.30 range if you look back to the May through July period of 2009.

 

 

bac2

The six month chart  paints the picture of the sell off and a number of signals that demand  we pay attention. In April of 2010 both the MACD and RSI were indicating that the stock was overbought and that sellers would take control of the market. A death cross developed in late June which provided another cause for concern.

 In addition if you draw a trend line from the April high its clear that BAC has meet resistance all along the line. The inability to breakthrough resistance along the trend line suggests it would be prudent to confirm the bottom before taking on a position.

 

BKX

The three year chart for the US Bank Index provides a similar view as the three year chart for BAC  however it would be a good exercise to look at the charts for all the stocks in the index to see if there is a pick of the litter that would reward you for the effort.

 

Happy Capitalism!

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