Looks like banks are on the move Tuesday. If it weren’t for the growth in commodity stocks, financials would be the best performing industry today with a 1.5% gain. Throw a line, and you’re bound to catch something that’s rallying in financials. However, it’s Bank of America Corp (NYSE:$BAC) that’s catching the attention of investors. After two and a half weeks of profit-taking, Bank of America’s stock is finally popping.
The North Carolina-based company is witnessing some nice relative strength today. In fact, it’s almost doubled the gains of the Financial Select Sector SPDR Fund (NYSEARCA:XLF, 2.8% vs. 1.5%) and reclaimed most of the ground it lost during the recent pullback.
Before we get into the details, let’s examine Bank of America’s weekly chart.
When looking at the chart, take note of the higher pivot high and the pair of rising pivot lows that formed over the past two months. Now that prices are above the 20-week moving average, the trend is officially pointing higher.
The key, however, is last week’s pivot low. So long as Bank of America’s stock stays above $23.60, bulls have the upper hand.
Additionally, it’s important to note that the Relative Strength Index (RSI) indicator has stayed north of 50 throughout 2017’s correction. By maintaining this bullish zone, it shows just how little momentum was lost during the downturn. Also, it helps support a positive outlook in Bank of America’s stock moving forward.
The daily chart created a bull retracement pattern which triggered with today’s up gap. Many would consider the fact that buyers have stepped up and defended the 50-day moving average as a bullish omen.
How Do You Bank on Bank of America’s Stock?
In addition, increasing bond yields are helping the bank rally today. If there is further strength from yields, this will continue to support bullish BAC trades. Seeing as there is implied volatility in the tank for Bank of America’s stock, it’s fair to say that long calls are worth a shot.
Purchasing the Sep $24 call for about $1 should do the trick. The risk is limited to the $1 and it will be lost if the stock rests below $24 at expiration.
While the reward is unlimited, many consider taking profits if the stock pops to $25.50 or higher.
Featured Image: twitter
