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5 Trades to Take After the "Obama Crash"

Bank of America

A similar setup is shaping up in shares of Bank of America (BAC - Get Report), it's just not as far long yet.

BofA is forming an ascending triangle, much like the one that Ford broke out of at the end of October. The pattern is formed by a horizontal resistance level and uptrending support -- basically, as shares of BAC bounce in between those two technical price levels, they're getting squeezed closer and closer to a breakout above resistance. For BAC, resistance comes in at $10 -- the breakout above that level is the buy signal for shares.

If you're a regular reader of this column, you know that talking about technical setups in real terms is crucial. After all, patterns like the ascending triangle don't work because of magic or geometry; it all comes down to supply and demand in the market. Resistance at $10 is a place where there's a glut of supply of shares. That's because it's a price where sellers have previously been more eager to sell and take gains than buyers were to keep buying. The breakout above $10 means that buyers have absorbed all of that excess supply at $10, and suddenly BAC doesn't have a barrier in the way of upside anymore. That's when you want to buy.
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