BAC Consolidation: 2 scenarios

2020년 10월 20일

BAC has been consolidating over the last two weeks, giving us an opportunity for a nice play on the stock. In this consolidation, we have two potential scenarios:

Bearish: BAC breaks out of the bottom trendline and forms a bear flag pattern to retest September low of ~$23.15 a share.
Bullish: BAC breaks out of the top trendline and retests $25

Out of these scenarios, I think that the bearish scenario is more likely. According to CNBC last week:

"Bank of America said it generated $20.45 billion in total revenue, missing the $20.8 billion estimate of analysts surveyed by Refinitv.
Profit in the quarter slumped 16% to $4.9 billion, or 51 cents a share, edging out the 49 cents estimate.
Its net interest income fell by $2.1 billion from a year earlier to $10.2 billion. CEO Brian Moynihan had said the key figure will likely bottom in the third quarter." (CNBC)

Revenue and profit were misses, largely due to huge decrease in interest income. The FED has signaled no new interest rate hikes in the next year (at least), keeping rates low. This will continue to hurt BAC revenue over the next several quarters.

Uncertainty in the market due to lingering coronavirus fears and stalling stimulus talks make a rebound less likely.

Stochastic RSI has crossed over in overbought territory, and MACD appears to be heading for a bearish crossover

First price target to watch is ~$23.15, next is $22.50 is support does not hold.

This is only an idea and not considered investment advice. Trade according to your own strategy and risk tolerance.