Bank of America Charts: Timing Is Key

To wrap things up, here's the daily chart.

In this chart we can see a resistance zone (demarcated by the high volume bars that occurred on selling and are clustered in the same areas) from the $18 to $18.50 level. Unless volume expands dramatically as that resistance zone is hit, then the odds for another pullback increase greatly.

As an aside, on this time frame, BAC looks to be setting up an AB=CD pattern that projects to the top of that resistance area. To be in effect, the B point needs to be crossed with volume to confirm the pattern. Unfortunately, if you wait for that, your reward-to-risk parameters do not work for a short-term trade (reward is $1.25, while risk is $1). For the more risky trader, to buy makes sense here, but realize the risk suffered on a stop loss is greater at this point than is preferable.

Entry in a consolidation pattern, as is the case with BAC, is to buy the bottom of the range and sell the top. That works as long as the consolidation continues to hold. The first two or three times (top to bottom) are usually a cinch. In the case of BAC, the first test of the bottom of the $15 to $18 range just occurred. The trade is to short the top end of the range if volume dies as we get to those levels or to simply wait and buy the next retest of the $14.50 to $15 area (this assumes that volume doesn't expand as prices come back again). If that happens, then you buy it and monitor BAC for a successful retest once more.

So, until next time, keep trading the charts!

At the time of publication, Little was short Wells Fargo.

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