Bank of America Earnings Preview: Must-Know Trading Levels

On the verge of reporting earnings, Bank of America isn't giving investors a clear signal. Let's look at how the stock looks now.
Author:
Publish date:

While Goldman Sachs  (GS) - Get Report has investors’ attention on Wednesday, that attention will soon shift to Bank of America  (BAC) - Get Report on Thursday  when the company reports earnings before trading begins.

Bank of America follows others like Wells Fargo  (WFC) - Get Report and JPMorgan Chase  (JPM) - Get Report, and reports alongside Morgan Stanley  (MS) - Get Report.

The price action has been mixed from the sector, perhaps making things a bit more difficult for Bank of America traders.

Investors still view the stock - and the sector - with skepticism. While the rally off the low has been noteworthy, it certainly hasn’t been as robust as other parts of the markets.

With the latest rally, Bank of America has retraced just 38.2% of its coronavirus selloff, (although it did reclaim the 61.8% retracement at one point, before falling in June). Let’s look at the charts more closely.

Goldman Sachs and JPMorgan are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells GS or JPM? Learn more now.

Trading Bank of America Stock

Daily chart of Bank of America stock.

Daily chart of Bank of America stock.

Bank of America stock spiked hard off the $20 level in mid-May, vaulting shares up toward $29. However, the 200-day moving average and the 61.8% retracement stymied the rally, as shares quickly retreated, then slowly drifted lower.

In recent trading though, the bulls have made a charge. Shares rallied 5.5% on July 10th, bouncing hard off uptrend support (blue line) and setting the stage for the stock to reclaim the 20-day and 50-day moving averages.

On the upside, the $25.50 area is quite key. This is a multi-year support mark that we have kept our eye on for quite some time. It's also near where the 200-week moving average comes into play. When this area failed as support, it helped us to avoid a major flush in the stock price.

For Bank of America stock to clear this level would be meaningful. It would open up the possibility for a run to the $28 to $29 area. There it would find several notable marks, including the June highs, the 61.8% retracement and the 200-day moving average.

On the downside, I don’t want to see Bank of America fall below its 50-day moving average and uptrend support. If it does, it puts the 23.6% retracement in play near $21.90, followed by the May low at $19.96. 

However, based on the reaction from most of the banking industry, I do not expect a major breakdown in Bank of America stock immediately after reporting earnings. If it does decline though, at least we will know where support is.