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Will Bank of America Sell Off on Earnings as JPMorgan Did?

Bank of America is falling in sympathy with JPMorgan's earnings reaction. Will it fall when it reports on Thursday?

It’s not a great day for the banks, even though this group has been a relative strength leader in recent weeks.

While the overall market has been struggling for upside, companies like Bank of America  (BAC) - Get Bank of America Corp Report have seen their stock prices rise to highs.

As earnings season kicks off, though, a cloud may be forming over this group. JPMorgan  (JPM) - Get JPMorgan Chase & Co. (JPM) Report delivered an earnings beat on Wednesday, but the stock is lower after the print.

On Thursday morning, Bank of America will report alongside Wells Fargo  (WFC) - Get Wells Fargo & Company Report, Citigroup  (C) - Get Citigroup Inc. Report and others.

Will the results be enough to elevate the group? Will the bank be enough to help give the Dow Jones Industrial Average a boost?

Let’s look at how the charts are setting up.

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Trading Bank of America Stock

Daily chart of Bank of America stock.

Daily chart of Bank of America stock.

As I said when I recently previewed JPMorgan’s results, it’s not uncommon for the banks to have a “sell the news” reaction.

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That’s even on good results and even more so with the stocks hitting highs.

For Bank of America stock, we’re seeing a three-day dip, with support coming into play from the 21-day moving average and the $42.50 area.

I’d love to see Wednesday’s low hold as support when the Charlotte banking giant reports on Thursday.

A break of this low that isn’t reclaimed puts the 50-day moving average in play, followed by $40.

A move below $40 could put the 10-month and 200-day moving averages on the table.

After the report, we may get some volatility. But the upside is simple for me, as I’m watching the $43.50 area.

A move above that mark puts Bank of America stock not only back above the 10-day moving average, but also above the second-quarter high and breakout level.

That would open the door to the highs near $45, then the 161.8% extension up at $46.70.

What we’re looking for is a continuation of what has been a bullish trade. 

If that trade is about to unwind, we don’t want to be caught on the wrong side. Keep $43.50 in mind on the upside and Wednesday’s low in mind on the downside.