6/6/2017 – Bank of America (BAC) Stock Chart Review
Bank of America (BAC) Stock Chart Review
My last Bank of America (BAC) stock chart article was back in February 2017. In that quick hits update, I mentioned that BAC's share price appeared to be developing into an Ascending Triangle correction pattern.
That update was a few months back and most bank stocks have gone nowhere since. Matter of fact, almost all the bank stocks I looked at leading up to this article are within 1-2% of their stock prices from February. Bank of America is no exception.
Let's check in on BAC's chart activity since that February update and determine what the most probable course of action is for its share price.
BAC - Monthly Candlesticks
This first chart uses monthly candlesticks to look at the longer-term trend for BAC's share price. The longer the time frame that a candlestick represents, the potential for the upcoming trend is longer.
For example, a monthly candlestick helps to identify the longer-term trend whereas a daily candlestick pattern helps to identify shorter-term trends. Intra-day candlestick patterns such as 5 minute, hourly, etc. represent even shorter-term trends and are typically used for day-traders.
This Bank of America (BAC) stock chart covers an approximate 10 year period - a definite longer-term perspective.
Let's first look at the longer-term implications of BAC's share price movements over the previous year. BAC's share price has reached the minimum 38.2% retracement of its previous downtrend. BAC's share price currently reside just slightly above the 38.2% Retracement Line from the black colored Fibonacci Retracement Tool.
As BAC's share price has pulled back from its February 2017 highs, selling volume has been decreasing over the 3 months since the start of the share price decline. Any continued decline should find strong support around the $19 price level. If BAC's share price does reach the $19 level, consider making a scale-in purchase to open a position in BAC or use that price to add to an existing position.
However, BAC may also find support right at its current price level, the $22 price area. That is why a scale-in strategy works best when entering into a new position. For those holding shares of BAC, consider adding to your position if its share price does move down to the $19 price area.
Because when BAC's share price resumes its trend upwards, the 61.8% Retracement Line from the black Fibonacci Retracement Tool will be the next upwards target area for BAC's share price.
There is a nice confluence of 2 Golden Ratios (the 161.8% Target Lines from the blue and green Fibonacci Extension Tools) right near the 61.8% Retracement Line from the Fibonacci Retracement Tool. This area appears to be the next consolidation period after its uptrend resumes.
BAC's share price is currently in a counter-trend which means its share price is in a consolidation period of a larger uptrend. Let's review some shorter-term charts to determine the extent of the counter-trend and verify the $19 support level as well as try to identify any others.
BAC - Bullish Impulse Wave Pattern
This next chart is a 2 year weekly candlestick chart. I've illustrated on the chart what I think is the current status of BAC's share price in a Bullish Impulse wave pattern. Bullish Impulse wave patterns are 5 wave patterns that develop to advance a stock's share price. Trendy Stock Charts members can access the members-only Elliott Wave pages to learn more about Bullish Impulse wave patterns.
After a strong uptrend, a 38.2% retracement is the most common, followed by a 50% retracement. BAC's share price has a support level from its Bullish Impulse wave pattern at both the 38.2% and the 50% Retracement Lines. BAC's share price also has a Rising Window candlestick pattern (gap-up) around the 50% Retracement Line.
All of the above adds up to strong support for BAC's share price in the even of a continued pullback over the next couple of weeks.
When the MACD Histogram on the weekly chart starts to show a slow down in the selling momentum, that would be the time to make an additional scale-in purchase if BAC's share price is at one of its support levels. Even though BAC's MACD Histogram is showing an increase in selling momentum, actual selling volume is decreasing. If that trend continues again by the end of this week, BAC's share price may be ready to end its counter-trend and resume its uptrend.
When Wave 5 starts to develop, the length of it can be estimated. It is usually either the approximate length of either the black Wave 1 or the black Wave 3. In BAC's case, that is a stark difference for the possible length of the black Wave 5. Wave 1 has a length of $5.31 while Wave 3 has a length of $13.75; statistically, Wave 5's tend to emulate Wave 1's more than Wave 3. That would put BAC's share price around either the $25 or the $27 price area depending upon the extent of this pullback.
Bank of America (BAC) Stock Chart Summary
Bank stocks, including Bank of America (BAC), appear poised to resume their rally and reach new 52 week highs in the next 3 months. Using any weakness over the next couple of weeks to enter into a position or to add to an existing position appears to be the best play until BAC's share price makes a new 52 week high. Picking up shares in the $19 - $20 range could provide for a lucrative return over the next couple of months.
Once BAC's share price does make a new 52 week high though, it will be time to re-analyze its charts and determine just how high its share price looks to be going.
If at any point there are any questions with the trade, feel free to stop by the Idea Chamber and ask some questions!
Good luck trading!