Here’s When You Need to Buy Bank of America Stock

Bank of America stock has underperformed its peers over the past few weeks. Here's where support should come into play for BAC stock.
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It’s been a rough ride for Bank of America  (BAC) - Get Report stock, with shares down about 22% from the 52-week highs it hit in January.

That’s more than double the decline in the S&P 500, which currently sits 9.8% off its all-time highs from February. It’s also worse than the 13% drawdown seen in the Financial Select Sector SPDR ETF  (XLF) - Get Report.

So what gives?

Bank of America pays a 2.5% dividend and is buying back gobs of stock. Shares trade at roughly 9 times earnings despite estimates calling for positive revenue and earnings growth both this year and next year. Analysts currently expect earnings to grow 9.8% this year.

Admittedly, the slash in interest rates will crimp the bank’s net interest margins, which helps explain why the sector has been under so much pressure lately even after solid earnings about six weeks ago.

Because of this, some will call the fundamentals mixed. Others will call them solid after the recent decline. But those who follow the technicals can’t ignore the major support mark sitting nearby.

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Trading Bank of America

Weekly chart of Bank of America stock. 

Weekly chart of Bank of America stock. 

Above is a weekly chart of Bank of America stock. The stock’s recent decline is similar to JPMorgan  (JPM) - Get Report, Goldman Sachs  (GS) - Get Report and Citigroup  (C) - Get Report. However, BofA has taken the worst of it, while JPMorgan has done the best, down “just” 17.5%.

I’m not sure if Bank of America will continue lower from here or if it has effectively put in a bottom. If it has bottomed, it hasn’t done so in convincing fashion.

Should Bank of America stock continue lower, I would love to see it test down into multi-year range support between $26 and $26.50. In this area, bulls have shown a propensity to step in and buy the stock. It may take a retest of the recent lows from the S&P 500 or some other negative event, but I would consider this a reasonable buying opportunity for investors.

It helps that the 200-week moving average is in play at $25.50 and rising, as it serves as a line in the sand for buyers. Those who nibble in the low-$26 range can stop-out of their trade should BofA close below the 200-week moving average on a weekly basis.

On the upside, see if Bank of America stock can reclaim the $30 to $31 area and the 50-week moving average. Above puts $33 on the table. For now though, BAC stock may very well be range-bound for the time being.