_________________________
Since topping out after its post-bear market bottom rally in April 2010, Bank of America has been in a firm downtrend, as you can see below on the extremely zoomed-out chart. The financials as a whole have more or less followed suit, albeit not quite in as dramatic fashion as BAC. At various times, I had been looking for a reason to trade the big bottom in financials, but the follow-through was never there. There have been reports that the $5 level in Bank of America’s stock must be defended by institutions in order for them to continue to hold the stock, else face forced selling.
As 12631 member “kelkun” noted inside our chat room today, it is tough to see an edge in the trade with so many eyes watching that $5 level. Bears are going full-tilt to break it, while bulls are putting their faith it holding. When situations like that arise, there are usually quick headfakes in both directions, without much overall progress being made other than to shake both sides out of their positions.
The bulls hope that all of the bad news is baked in the Bank of America cake. The problem with that thesis is that hope is not a trading strategy, and there is little, if any, technical evidence to support that view yet. That might eventually change, but with so many eyes watching $5, I have a hard time believing the market will make it that simple.
_________________________
I love Pedro bear.
Don’t you expect BAC to do a BAC*10 or reduce its outstanding shares by 10 like Citibank did ? Citibank’s share was suppose to be $2.5 not $25, due to this reverse split trick.
“The bulls hope that all of the bad news is baked in the Bank of America cake. The problem with that thesis is that hope is not a trading strategy, and there is little, if any, technical evidence to support that view yet.”
Actually, I would offer that the positive momentum divergence in $BAC is pretty strong technical evidence the stock is a bear trap that has not yet been sprung.