Lessons and Levels to Watch on Bank of America BAC

Dec 6, 2010: 1:24 PM CST

Bank of America has been in the news lately, and it’s one of the major financial companies that’s underperfoming its peers in the financial sector.

Let’s start with the Weekly Chart and then drill down to the Daily Chart to look at possible opportunities, levels, and lessons.

BAC Weekly:

If we cut through the noise and focus on price, we see that BAC stock is in a weekly chart downtrend, having made lower lows, lower highs, and the 20/50 EMA structure is clearly bearish.

Ok, given the downtrend, there’s a key level to watch right here that could result in a short-term move – or at least pause/consolidation of the trend.  IF NOT, then it’s down to lower levels.

For now, let’s focus on the $11.00 per share level, which is the 50% Fibonacci Retracement as drawn off the 2009 low to the 2010 high.

Sometimes price stops on the half-way point during a retracement – but if price does not hold here, then a breakdown sharply under $11 targets the 61.8% Fibonacci level at $9.15.

For additional reference, the falling 20 week EMA rests at $12.68, which will come in shortly when we look at the daily chart.

Keep this weekly structure and simple levels in mind as we drop to the daily chart.

Throwing volume and the 3/10 Oscillator into the mix, we still see a persistent downtrend in price (lower lows, lower highs, and a bearish EMA orientation).

Again, for the moment, sellers have to battle buyers here who are playing for a bounce off support at the $11 level… and so far, the buyers have pushed price near the $12.00 level.

Here’s where watching what happens next comes into play.  There’s a positive divergence from the 3/10 Oscillator (bullish) but there’s overhead confluence resistance at the $12 per share level.

Why?

The 50 day EMA rests solidly at $12.08, and the August price swing low rests at $12.16.  As I mentioned on the weekly chart, the 20 week EMA is slightly above here at $12.68.

Finally, there’s a prior swing high – an immediate target if buyers break above the $12 level – at $12.73.

So, for short-term traders, expect a possible target of $12.70 if buyers break stock sharply above $12 soon.

Otherwise, look for $12 to be the key short-term level that divides bulls and bears – buyers and sellers.

The $11 level still is a strong support zone – quite strong actually – but if sellers take over, the next target then becomes the $9.00 level.

Use this as an example of multi-timeframe level analysis as well as objective, non-biased “IF/THEN” scenario formulation depending on what happens – and thus what targets to expect – as buyers and sellers ‘battle’ to hold or break a key/important price level.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

1 Comment

One Response to “Lessons and Levels to Watch on Bank of America BAC”

  1. Alt2dude Says:

    The price level of 11 as support in BAC is also interesting because 11 has been a multiple in the past – the high of 55, for example.