Let’s look at one member of the banking industry, Bank of America (BAC). This bank was a member request a short while back.

In an environment where interest rates are expected to rise over the upcoming year, many investors are anticipating better times ahead for the banking industry as a whole. This provides for a much better outlook for the banking industry as a whole.

This summer the industry will be coming up on the 10 year anniversary of the beginning of the market crash. With some bank stocks trading at elevated prices due to the “Trump Trade” run-up, is caution warranted?

In a previous article related to the banking industry, I wrote about Goldman Sachs and pullback areas to watch for. You can access that article here “12/17/2016 – Goldman Sachs Group (GS)“.

But in a time that could be favorable to the banking industry as a whole, its time to broaden the scope of coverage. This article will focus on Bank of America (BAC) and any potential trade set-ups that are developing on its charts from a technical perspective.

Bank of America (BAC) – 20 Year Chart

This first chart for Bank of America (BAC) is a 20 year candlestick chart. Since Bank of America (BAC) is on the list of newer companies being covered, it is important to see where its price has traveled over a 20 year look-back. This may be able to provide some guidance looking forward for its share price.

Analyzing a 20 Year Chart for Bank of America (BAC) Looking For Long-Term Trends or Trade Set-Ups

The Fibonacci Retracement Tool on BAC’s downtrend suggests that the “easy” part of the rebound is over. The “easy” part is defined as the 38.2% Retracement or back to the $22.60 area.

The question now becomes, can BAC continue its rebound and perform a 50% or even a 61.8% retracement? With a MACD Histogram that is showing an increase in buying momentum, the odds look favorable.

BAC – Fibonacci Extension Tool

This next chart is the same 20 year monthly candlestick chart. I left the Fibonacci Retracement Tool from above and I also placed 2 different Fibonacci Extension Tools on it.

I am using the Fibonacci Extension Tools to calculate some upside price targets for BAC’s current uptrend. I am also looking for confluence areas between the Target Lines of the Fibonacci Extension Tools and the Retracement Lines from the Fibonacci Retracement Tool.[s2If !current_user_can(access_s2member_level1)]…..

If you want to continue reading this article on Bank of America (BAC), including its price projections and trading opportunities, then you must first login. Once you do, you can see my projected upside target prices for Bank of America’s share price.

If you are not a Trendy Stock Charts member, then consider subscribing today! There are several different subscription plans available.[/s2If][s2If current_user_can(access_s2member_level1)] Keep an eye out for any possible confluence areas.

Using Fibonacci Extension Tools to Calculate Upside Price Targets for Bank of America (BAC)

There is a confluence of 3 lines between $32.50 – $35. Two of the lines are 161.8% Target Lines (or Golden Ratios) from the Fibonacci Extension Tools I overlaid on the chart.

Notice the different time periods covered by the 2 different Fibonacci Extension Tools? They cover 2 very different time periods yet they yield almost identical forecasts for BAC’s share price. Let’s look at some shorter-term charts and figure out how to get in on the uptrend.

BAC – Confluence Areas

This chart is a 1 year daily candlestick chart. I am showing this chart for the purpose of a lesson. It is very important to always try and place multiple tools on a chart and look for confluence areas. When I look at this 1 year daily chart for BAC, it shows how its share price jumped from one confluence area to the next, without really stopping in between. That is why it can be important, and profitable, to find confluence areas.

Illustrating Bank of America’s (BAC) Share Price Movement Between Confluence Areas

Ok, so the lesson about confluence areas is over. If you want to learn more about placing multiple tools on a chart, visit the Charting Tools page and select the tool that you want to learn more about.

But important to note – the next set of confluence areas is in the $32.50 – $35 range. How quickly does BAC’s share price move from its current levels to there once its consolidation is over? That potential move for the share price could be an excellent trade opportunity.

BAC – 50 Day Moving Average Watch

This is a 1 year daily candlestick chart for Bank of America where I’ve included a couple of different moving averages. A pullback to or below the 50 Day moving average is a less risky point to try and enter into the BAC trade at this point. Its share price has been moving relatively sideways for a couple of weeks now.

Analyzing a 1 Year Chart Using Moving Averages as a Guide for an Entry to Go Long

Any breaks below the 50 Day moving average could be used as an opportunity to make a scale-in purchase to go long. With an uptrend that lasted several quarters though, BAC’s share price could have a little more time consolidating before the next leg up. So do not be too quick and make multiple scale-in purchases in the same general price range.

Bank of America (BAC) – Summary

With a backdrop of rising interest rates and possibly even less regulation, the banking industry could be poised to outperform over the next year. Even after its extended Trump rally that brought BAC’s share price to new 52 week highs.

Any continued rise in interest rates over the next year or two could see BAC’s share price rise towards a 61.8% Retracement of its downtrend. That would put its share price back in the $35 range. A very nice move if you can get shares potentially around or under the $20 mark.

Based on the above analysis, any pullbacks to the $19-$21 area seem to represent an excellent opportunity to go long shares of Bank of America (BAC). There are 2 Rising Window candlestick patterns with “open windows” still. These areas should provide excellent support during any continued pullback that started in earnest last week.

Hold onto shares purchased at that level and look for a $35 upside price target. That price target can be reached faster with a faster rate increase cycle. That price target could be reached in less than a year’s time, and that includes the time needed to complete the current consolidation. For a buy and hold investor, that could be a nice opportunity. For traders, it may be even a better opportunity.