While Bank of America deserves its fair share of criticism, I myself was critical of the recent breakdown in prices at the beginning of 2014, it is hard to contend currently that the posture of the stock is not bullish.
The recent consolidation over the past 10 months has created a nice support base to launch another extended rally from. Since the "Warren Buffett bottom", BAC has rocked over the past 2 years. The stock has rallied nearly 300% off the lowest prices and the recent pause appears to have been just a rest before a new leg higher.
There is a lot to like on multiple viewpoints. This week we are seeing the highest weekly closing price since early 2010. The breakout as the look of a continuation Cup/Handle pattern and projects prices 20% higher as an initial target.
The risk is also well defined as the "Handle" low at $16.20 is only 8% below current prices. A break of that level would also break the rising 20 WMA as well as the 2-year uptrend support that has contained this entire rally. A weekly close below $16.20 and we would step aside.
There is still resistance in this area going back to the financial crisis and 2010 highs so it won't be easy.
But we have a clean breakout, a defined uptrend, and a very manageable risk/reward. Plus our indicators still suggest the uptrend is well intact and likely headed higher from here.
This now brings our XLF holdings up to 3 with GS and BRK.B, so we will be maxed out in Financial stocks after this purchase. The group looks poised to lead the market here, lets see if we can catch a nice ride.
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