Sometimes you get caught up in the day to day grind and forget to stop and look at the world around you. The stock market equivalent of that is getting caught up in the minutia of Greece or the Fed raising rates or the next economic data point. News comes out, it is interpreted and then we look at stocks to see what happens, today.
As we approach the mid way point in the year though, it is a good time to step back and look at the bigger picture. As a technician, this means looking at monthly charts. We all know that on smaller timeframes, the financial sector is ready to bust loose. But then you look at the leaders like Goldman Sachs (NYSE:GS), Wells Fargo (NYSE:WFC) and JP Morgan and see they are well into trends higher.
But there are other stocks with strong technical potential in that sector. Bank of America (NYSE:BAC) is one of them. The chart above shows the stock price over the last 15 years on a monthly timeframe. There are several great reasons in that chart to own this stock.
First is that the price is trying to break above 6 year resistance. As it reaches this red dotted line again, the volatility in the stock has decreased substantially as measured by the Bollinger Bands®. This is often a precursor to a big move. The momentum is positive, with the RSI in the bullish range and the MACD trying to cross up again.
Looking left, the volume by price plot shows the history of price at each point. This is a very telling story. There is almost no price history over the current level near 17.50. A vacuum above. If you look at the move from the 7.50 level in 2012 to the current plateau, you get an estimate that a move could go as high as 27.50 on a break out. That is real money. And with a stop at 15 gives a strong reward to risk ratio. So do you still not own Bank of America stock?
Disclaimer: The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog. Please see my Disclaimer page for my full disclaimer.