Skip to main content

Should You Buy the Earnings Dip in Bank of America and Goldman Sachs?

Banks are trying to shake off a 'sell the news' reaction after reporting earnings. Let's have a look at the charts.

The banks have been on fire over the past few months but the post-earnings reactions have been a bit of a mixed bag.

On Tuesday, both Bank of America  (BAC) - Get Bank of America Corporation Report and Goldman Sachs  (GS) - Get Goldman Sachs Group Inc. (The) Report reported earnings.

They follow last week’s reports from JPMorgan Chase  (JPM) - Get JP Morgan Chase & Co. Report, Citigroup  (C) - Get Citigroup Inc. Report and Wells Fargo  (WFC) - Get Wells Fargo & Company Report. Given the rally we’ve seen in this group, traders shouldn’t be surprised by the post-earnings dip we’re getting now. 

For Goldman Sachs, the company smashed expectations, while Bank of America didn’t give investors much to complain about either. It beat on earnings expectations and announced a $2.9 billion buyback plan.

Now the question is whether these stocks can shake off the mixed results.

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

Trading Bank of America

Daily chart of Bank of America stock.

Daily chart of Bank of America stock.

Bank of America stock dipped on Friday as the other banks slipped after reporting earnings. After opening lower on Tuesday though, shares quickly found buyers.

Bulls bid Bank of America back over the 10-day moving average, but it's now stalling at the prior session’s high.

Scroll to Continue

TheStreet Recommends

Now we want to see if we can get a rotation over this area, near $33.63. Above this level puts the pre-earnings high in play at $34.37, followed by a possible retest of pre-coronavirus high near $35.75. For context, this level is from December 2019.

On the downside, a close below the 10-day moving average could put the 21-day moving average on the table.

Below that and a gap-fill down toward $30.50 is possible.

Trading Goldman Sachs

Daily chart of Goldman Sachs stock.

Daily chart of Goldman Sachs stock.

The strength in Goldman Sachs is truly impressive, but not surprising given how many deals there have been in the investment world over the last six to nine months.

Let’s see if the active bulls step up. That is, will they buy on this shallow dip to the $293 to $295 area?

A decline to this zone fills the gap from last week and tags the 10-day moving average. Goldman Sachs hasn’t actually touched this key short-term moving average in over a month.

If it holds, investors will want to see a move back over $300, putting the highs in play near $310. Above that and the 161.8% extension is possible near $324.

On the downside, a close below the 10-day moving average could put the 21-day moving average in play.