While Bank of America (BAC) has enjoyed a solid post-Christmas rally -- up about 13% from its Christmas Eve lows -- shares are roughly flat Wednesday. That's despite opening higher on the day after it received a pair of upgrades.
Analysts at Edward Jones upgraded the stock to buy, as did UBS analysts. The latter group slapped a $32 price target on the stock, implying more than 25% upside from current levels.
The upgrades come despite banks facing massive pressure on their stock prices and about a week ahead of a series of important earnings results. Citigroup (C) will report earnings before the open on Jan. 14, JPMorgan (JPM) and Wells Fargo (WFC) will report before the open on Jan. 15, and Bank of America will report before the open on Jan. 16.
In other words, we'll know just how these companies are doing soon enough. We already know that consumer spending has remained strong but mortgage applications took a dip over the past few months as interest rates climbed. Further, while higher rates are generally good for bank stocks, a flattening yield curve is not, as it squeezes profitability on the spread. That's one reason bank stocks have been under pressure -- the other reason being an increasing fear of a recession.
Shares closed Wednesday up 0.98% at $25.76.
Trading BAC Stock
Given its valuation and growth, the stock's beating is somewhat surprising. Earnings estimates now call for $2.56 a share. That estimate has actually increased over the last 90 days, surprising given that BAC's three-month performance is down 15.7% despite the bounce from its December lows. As it stands, expectations call for earnings growth of 38% this year and 11.7% in 2019, while shares trade at about 10 times this year's estimates. The stock also pays a 2.5% dividend yield.
None of that has helped give any reprieve to the stock price, though. While BAC stock has rallied back above the 21-day moving average, the 50-day moving average looms ahead just over $26. This mark has been resistance since the start of the fourth quarter. Making matters worse, former downtrend support sits right near the 50-day. This level (highlighted in blue on the chart) buoyed Bank of America stock lower all through 2018, acting as support along the way. Now that this mark gave way in December, it will likely act as resistance on the way back up.If financial stocks explode higher on a massive rally, then the 200-day could be in store for Bank of America. More likely, though, we'll find resistance between $26 and $26.50, allowing for BAC to pullback and reset before another possible push higher.