Critical Trendline Channel and Trade Planning for Bank of America BAC

Apr 25, 2014: 10:43 AM CST

Bank of America (BAC) shares are challenging a critical “Make or Break” rising trendline boundary which will trigger a short-sale bias if price trades beneath the level.

Otherwise, if the rising trendline channel holds, shares could resume a primary uptrend.  Even if you don’t trade this stock, it will be important to note whether buyers again defend the uptrend in this leading fincnail company… or fail to do so which could be a bearish omen for the broader stock market.

Let’s get to work and study the pattern and key levels to watch (or trade):

BAC Bank of America Rising Parallel Trendline Channel Support

The Daily Chart reveals a clear “Rising Parallel Trendline Channel” pattern or – as I showed earlier with the S&P 500 – a “Rising Trendline Magnet Structure.”

This simply means that we can reference a clear rising upper resistance trendline (currently above $18.00 per share), a clear lower rising trendline support pattern (which is drawing our attention at $16.00 per share) and the Midpoint or Magnet price above $17.00 per share.

If we over-simplify the planning, we’ll look for an impulsive downside bearish break under the current $16.00 per share low which could track price down to $15.00 then likely the $14.00 per share area for a “Breakdown” or “Breakout of the Trend” play.

Otherwise, we can see plenty of prior events where the same planning was in effect – either price held the lower rising support line to continue the trend or else it broke to reverse it.

In each prior example, buyers stepped in to pull price back toward – then above – the Midpoint Magnet.

Will this time be different?  Watch $16.00 carefully in the days ahead and react accordingly.

Let’s pull the perspective back to get a sense of the broader trend, prior reversal, and why $14.00 is  important:

BAC Weekly Chart Rising Trendline Structure Level Planning Bank of America

I highlighted the prior downtrend from 2010 which was reversed in 2012 as the genesis of the current Rising Parallel Trendline Channel.

From the past, we see two major levels to watch and they include the current $18.00 per share high (pivot resistance/reversal from 2010) and the $14.00 level (pivot support as highlighted on the left side of the chart).

These are just reference levels to use for planning – they’ve been important to traders/investors in the past.

Beyond this, we can see the 3/10 Momentum Oscillator showing Divergences at key turning points and spikes or strength as the trend continued.

We’re now seeing a multi-swing negative weekly divergence into the $18.00 level as drawn – that’s not something buyers would like to see.

It draws our attention to the $16.00 level and how important this level is to hold as support.

Failure here opens a downward or sell-pathway toward the $14.00 level for a potential reversal or breakdown play.

Be objective in your trade planning and focus on the current “Make or Break” level and assess whether buyers once again step up to buy shares off support… or fail to do so which would likely embolden bears to strike at the stock and push it toward lower targets such as $14.00 per share.

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Corey Rosenbloom, CMT
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2 Responses to “Critical Trendline Channel and Trade Planning for Bank of America BAC”

  1. Big Names Trending in our April 28 Intraday Trading Update | Afraid to Blog Says:

    […] top four of the pack include Bank of America (BAC – note my update last week and the potential for a bearish break which triggered today), Chipotle Mexican Grill (CMG), (AMZN), and […]

  2. May 6 Reversal Stock Trading Update | Afraid to Blog Says:

    […] Bank of America (BAC) continues its slide (see my prior update on the likely trend reversal and breakdown pathway for BAC). […]