During last Thursday's "Mad Money" program, host Jim Cramer took a look ahead to a select list of companies that are due to report earnings this week. Wednesday brings earnings from more banks, including Bank of America Corp. (BAC) , Let's check out this bank (full disclosure: BAC has been my banking institution for the past 20 years).
In this daily bar chart of BAC, below, we can see an improving technical picture. The price of BAC declined sharply to a low in March. We saw a bounce and pullback into early April that helped to tell us that a low and retest was in place. Trading volume was very heavy and made it easy for a fund or institution to acquire shares on weakness. The daily On-Balance-Volume (OBV) line moved lower in February and March but did not break the lows of the previous year. Now we see the OBV line moving up sharply, telling us that aggressive sellers have become aggressive buyers.
The trend-following Moving Average Convergence Divergence (MACD) oscillator has turned upward, signaling a cover shorts buy signal last month. Crossing the zero line would be the next signal in the weeks ahead.
In this weekly bar chart of BAC, below, we went back five years to see why prices found buying interest around $18 in March -- it was a previous resistance area from 2015. Somebody must have looked at the chart. Prices are below the declining 40-week moving average line. The weekly OBV line shows recent weakness, but the bigger picture is a long sideways trend the past two years or so. The weekly MACD oscillator is clearly bearish.
In this daily Point and Figure chart of BAC, below, we can see that the software has recognized the price action the past few weeks as accumulation (buying) and has generated a potential upside price target in the $35 area.
Bottom line strategy: BAC has established a low in March but it has also rallied quickly in recent sessions. I would anticipate that BAC pulls back perhaps to around $22 or so and makes a broader base pattern. I have no indication on how traders may have positioned themselves ahead of earnings this week, especially in this fluid environment with the Federal Reserve.