With the federal-funds rate going to near zero, energy stocks collapsing alongside the price of oil, and stock market volatility roaring, the bank stocks have been crushed.
Two months ago Citigroup (C) - Get Report, Morgan Stanley (MS) - Get Report, Bank of America (BAC) - Get Report, JPMorgan (JPM) - Get Report and Goldman Sachs (GS) - Get Report reported strong earnings. Some went to all-time highs and many traded to 52-week highs.
Then the volatility hit, as investors feared a repeat of 2008. That’s despite the banks being in a much stronger financial position than they were a dozen years ago.
Even though the banks had to halt their stock buybacks - a major catalyst for shareholder returns - many of these stocks have been severely oversold. A glance at the charts suggest that Bank of America may be one of them.
Let’s take a closer look at the long-term charts for the Charlotte, N.C., banking giant.
Trading Bank of America Stock
Using an 11-year weekly chart makes seeing individual levels a tad difficult. But it doesn’t take a magnifying glass to see how vital the $16.50-to-$17 area should be.
This zone was major resistance in 2009 and 2010, as the shares sank more than 60% after failing to break out over this area.
This $16.50-to-$17 area was also resistance in 2014 and 2015, with Bank of America stock not breaking out over this level until the presidential election in 2016.
I view this area as likely support, should BAC stock test down into it.
With a current 52-week low of $17.95, so far we’re seeing the shares bid back higher. Shares of Bank of America are ripping on Tuesday, up as much as 15% on hopes for a stimulus bill.
That makes it hard for traders who missed the boat. But bulls may be looking for yet more upside at this point.
Not pictured above are the 100-month and 200-month moving averages. The former comes into play near the lows, at $18.36. The former comes into play at $21.79.
If Bank of America stock can clear this level, it puts the backside of prior long-term uptrend support (blue line) in play near $24. Above that and the 200-week moving average at $25.41 is possible.
On the downside, bulls need to see the $16.50-to-$17 zone hold as support, should BAC shares break below the current low. In that event, I do like Bank of America long against this former breakout zone.