Bullish Bank of America Prices are Expected

Bullish Bank of America Prices are Expected
February 10, 2015

The Bank Of America (NYSE:BAC), was on the move today after Friday’s jobs data in the United States. While there are no internal news releases publicised, I would say a jump is possible, but this assumption is based on a more of a technical analysis.

Due to the weak banking sector, January proved to be a month in which BAC suffered as the stock price dipped almost to the 15 level. However, there is a clear “W” shape at that level and this points out to one of the most famous reversal patterns: a double bottom.

The beauty of this pattern comes from the fact that it is a measured move, or the minimum distance to be travelled after the pattern is completed. This points to levels higher than the current 16.36 with almost one full dollar.

The next thing to do before deciding to take a trade is to look at the time frame the pattern appears in order to pick the right expiration date.

Taking into account the fact that we’re in the first half of the month, the end of the week or end of month would be more appropriate, with an emphasis on an end of month expiration date for at least the following reasons:

  • The pattern is formed on the daily chart
  • The neckline may be re-tested and in such a time frame this means a lot of time for the move to the downside as well.

Therefore, I would favor call options on the pair with end of month expiration date as a conservative trade. For the more aggressive binary options traders, end of week should be a good choice as well.

One more thing to consider would be the fact that the whole banking sector is lagging of late. However, the SP500 and Dow moves to the upside and this should be a good incentive to look for a possible reversal pattern… and a double bottom is a reversal pattern.

It remains to be seen if market will confirm the bullish sentiment around BAC.

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Andrew Wright

Prior to founding tradersasset.com in 2014, Andrew worked as a proprietary trader, then as a market maker. As a market maker, he traded options in over 100 stocks, he then began trading currency pairs in 2013. Andrew still actively trades both, and prides himself on educating and informing traders on the benefits of both Binary Options and Forex.


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