Saturday, August 8, 2015

Bank of America (BAC): Daily Chart Shows Attempted Breakouts Failing At Various Scales

(note: updated chart at bottom of post)

Last week I pointed out in a post here that BAC was still was bumping its head on long-term weekly resistance - in terms of the weekly chart there has not yet been a breakout.  

This week BAC's price dropped a bit more, so I decided to take a look at a daily chart in a bit of detail to see what potentially useful information could be obtained.  Here is what I came up with:

click chart to enlarge

This daily chart shows that BAC closed above long-term resistance (solid red line) a couple weeks ago but that with this week's price action the price is now slightly back below long-term resistance. So now BAC is below long-term resistance on both the daily and weekly charts (I still think weekly is much more important however.)

This chart also shows a channel within a channel (dashed lines).  BAC appears to have failed to maintain a breakout of both channel resistance lines.  Accordingly, channel support lines that can act as stop loss triggers are $1 (small channel) and $2 (large channel) per share below the current price.  

In the past, hitting channel resistance has twice led to a price decline back to the base of the larger channel (see previous two small channels on chart). Now a decline back down to the based of the large channel would take BAC to $15.75 a share (and near oversold conditions per RSI), which is also about where weekly support is on my chart in the previous post.

So buy and protect with a near-zero tolerance against loss is now problematic if BAC was recently purchased based on the breakout on the daily chart.  Of course, this problem could have been avoided if the weekly chart and resistance line were used instead. One can hope that BAC will move back above and stay above the resistance lines and that they become support lines - but hope is not a viable strategy in my opinion.

Updated Chart (8/19/2015):

click chart to enlarge

Caution: This analysis is not a prediction and is not investment advice - it is just my opinion based on my analysis of this chart and is intended as an example of how I use technical analysis to aid in investment decisions. Please remember, you and you alone are responsible for you investment decisions! See disclaimers below and elsewhere on this website.

Not Investment Advice | Important Disclaimer: 
The content in this article, including the identification and discussion of any specific security (e.g., bond fund), is NOT meant to be and should NOT be construed and/or used as investment advice. This article is for general information and educational purposes only. Please read the Disclaimers  for in their entirety. The U.S. Securities and Exchange Commission website has guidance on selecting an investment adviser.

Financial Disclosure:
The author/publisher has no position (long or short) in BAC at the time this article was written. This position may change depending on future price action.

 Base Chart Provided Courtesy of  Analysis and Annotation by JunkBond (all rights reserved)

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