Bank of America Flirts With Key Area Ahead of Earnings

Bank of America has been under significant pressure but it's putting together a rebound. Let's look at the charts for the stock.
Publish date:

Focus is starting to shift back to bank stocks, as the group gains upward momentum. In the case of Bank of America  (BAC) - Get Report, shares rose about 4% in trading Wednesday. That brings the stock’s three-day gain to roughly 15%.

Just as the banks have been in focus this week, they also will be next week as well. JPMorgan Chase  (JPM) - Get Report and Wells Fargo  (WFC) - Get Report will kick off earnings next Tuesday, while Bank of America, Citigroup  (C) - Get Report and Goldman Sachs  (GS) - Get Report will report on Wednesday.

While the last few days have been an impressive show for bank stocks, the fall from the top has been less than graceful. Many of these stocks rallied to new 52-week or all-time highs in January on better-than-expected quarterly results. My how long ago that feels.

Since then, several have fallen by more than 50% from peak from trough, as investors panicked about the banks’ future prospects. Let’s have a closer look at one of traders’ favorite stocks among the group, with Bank of America. 

Citigroup, 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 C, GS or JPM? Learn more now.

Trading Bank of America

Daily chart of Bank of America stock. 

Daily chart of Bank of America stock. 

Shares of Bank of America fell about 50% from the December peak to the March low. As you can see on the daily chart above, the selling was relentless. Now though, the stock is trying to find its footing in the low-$20s.

Bank of America bounced hard off of $18 and rallied to what has become resistance at $23, before pulling back. The pullback was important though, as it gave traders a higher low, a bullish development on an otherwise very bearish looking chart.

In the last few days though, bulls have gained even more ground. The stock has reclaimed the 20-day moving average, while it now works on pushing through $23. If BofA stock pulls back, investors will want to see it hold short-term uptrend support (blue line). Below that and it needs to hold $19.50. Otherwise, it puts $18 back on the table.

On the upside, let’s see if Bank of America stock can clear the March high at $24.25, putting a gap fill toward $25 in play. Above that though and the stock has some serious resistance.

Weekly chart of Bank of America stock. 

Weekly chart of Bank of America stock. 

Above is a weekly chart, highlighting the tough level of resistance that sits up between $25 and $26. There the stock will run into prior range support. It’s expected that, at least upon the first test, that former support will act as resistance, particularly given how quickly shares knifed through this mark.

Additionally, the 200-week moving average is in this area.

So where do investors go from here? Let’s see if BAC can close over $23 and the 20-day moving average. Over it keeps $24.25 in play, followed by resistance near $25. Below $23 keeps a drop to the $20.50 to $21 area in play, followed by $19.50.