Shares of Bank of America (BAC:xnys) two weeks ago bumped into a major area of technical resistance where reward-to-risk on the upside has dramatically weakened for the time being, and in fact the downside is looking attractive for a trade.
The severity of the entire reflation trade in risk assets, and particularly in US equities since February, has caught many by surprise, yours truly included. For a good part of the multi-month rally financials, such as BAC stock, lagged the broader market. But when late March/early April came around, they began to show leadership, legged higher and kept the broader market afloat.
BAC has returned to previous longer-term line of support — now resistance
The daily chart shows that the entire move off the February lows looks to have come in a fairly classic A-B-C countertrend move. Note that the horizontal line of resistance now also roughly lines up with the stock’s red 200-day simple moving average, adding to overhead resistance.
Management and risk description
Entry: Short the stock or CFD, or buy cheap put options or put option spreads if the stock is at $14.50 or higher
Time horizon: 3-6 weeks
— Edited by John Acher