Bank of America stock (NYSE: BAC) prices are trading at a new monthly low, reflecting a 7.6% decline since the publication on January 15 of an unclear quarterly report that exceeded market expectations, but left investors wondering about the stock direction. Recently, many bank stocks dropped last week because of lower US Treasury yields.
We are expecting Bank of America stock price and all bank stocks to be more volatile this week because of the FOMC meeting and a data dump by the Treasury Department. Dovish sentiment by the Fed will mostly cause a dip for financials. The expert consensus is that there will not be any significant change in policy, but bank stock investors should be aware that the market is susceptible to the news. Thus could cause a jump or drop in bank/financial stocks. Investors that want are willing to take on the risk may consider going long in the dips. However, if yields and rates fall, this could turn into 2008 all over.
Bank of America earnings per share grew 5.7% YoY to $0.74; revenue decreased by 1% YoY to $22.5 billion. In the first half of 2020, the company management expects a decrease in net interest income, which puts pressure on the issuer’s quotes. Over the past week, Bank of America shares fell 3.40%. The S&P 500 index fell 0.65% over the same period.
Investors are primarily focused today on the spread of the new Chinese coronavirus. However, investors should be on the lookout for pullback up to 5% because of low earnings. Art Hogan, National Securities chief market strategist, said in a CNB interview, “There are five technology names that are driving a good chunk of the movement in the S&P. On the other side, you see the utilities index,” he explained. “The index is trading at 25 times, and it’s throwing out a dividend that’s less than 3%. Both of those numbers are historically stretched. This is an index that usually trades at 16 times and has about a 5% dividend.”
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According to the statements of the Chinese authorities, more than 2.8K citizens have been infected, 81 people have died, and the peak of the epidemic is probably still ahead. Investors fear a recurrence of the situation of 2002–2003 when atypical pneumonia has already led to severe economic losses in the region. According to the first expert estimates, if the epidemic lasts three to four months (as in the previous case), the PRC economy will receive a serious blow, and the GDP may decrease by 1% in the first half of this year. The world economy will also undergo severe pressure, in particular, tourist volumes and energy demand may be reduced. During the day, investors expect the publication of US New Home Sales. The figure will likely increase from 719K to 730K, which will strengthen the position of USD.
The Euro is under pressure from the Chinese epidemic, which could negatively affect the global economy. An additional negative impact on EUR is provided by weak data from the IFO index of the German business climate published today. Instead of the expected growth, the indicator fell from 96.3 to 95.9 points. December Manufacturing PMI recovered, but the services and construction sectors have severely reduced. Most likely, the German economy will continue to grow but at a very moderate pace. On the other hand, evidence that the Liga party of the well-known Italian Eurosceptic Matteo Salvini was unable to win the regional elections hampered a severe decline in EUR, which may indicate a decrease in Salvini’s chances in the struggle for the Italian prime minister’s chair.
Due to a lack of significant economic releases, British investors are focused on Brexit. After Britain leaves the EU at the end of the week, a transitional period will begin, during which the British leadership will negotiate with the US and the EU on free trade. Yesterday, Brexit Secretary Stephen Barkley said the government would seek to conclude a deal with the EU with zero tariffs and quotas. As for trade relations with the United States, on Sunday, US Treasury Secretary Stephen Mnuchin said that a trade agreement would be possible this year, and the US government was ready to allocate “a lot of resources” for its conclusion. Nevertheless, Washington continues to oppose the British digital tax plan.
Bank of America Support and Resistance
The Bank of America stock shares went down after a protracted growth. The issuer has renewed local lows. At the moment, #BAC quotes are testing the support level of 33.35. The level of 34.50 acts as a “mirror” resistance. There is potential for further correction and possible drop below support. Indicators do not give accurate signals: the price consolidated between MA (50) and MA (200); the MACD histogram is in the negative zone. It is better to open the positions from the key levels. A comparative analysis of the multiples of the company and competing companies in the industry indicates the neutrality of #BAC.
Resistance levels: 34.50, 35.70.
Support levels: 33.35, 32.50, 32.00.
Bank of America Stock Trading Ideas
Short positions may be opened after the price consolidates below the level of 33.35. The closing of the profitable positions is possible at the levels of 32.00, 31.00 and 30.00. Stop loss – 34.50.Long positions may be opened after the price consolidates above the level of 34.50 with the targets at 36.50–37.50. Stop loss – 33.40.Implementation period: 3 days.
Bank of America Stock Recommendations
Jan-21-20 Downgrade Atlantic Equities Overweight → Neutral
Jan-09-20 Initiated DA Davidson Neutral $36
Jan-07-20 Downgrade UBS Buy → Neutral $34 → $36
Jan-06-20 Upgrade Barclays Equal Weight → Overweight $43
Jan-03-20 Downgrade BMO Capital Markets Outperform → Market Perform $37
Oct-29-19 Downgrade Societe Generale Hold → Sell
Oct-28-19 Upgrade Odeon Hold → Buy
Oct-22-19 Upgrade Atlantic Equities Neutral → Overweight
Sep-06-19 Downgrade Keefe Bruyette Outperform → Mkt Perform $36 → $29
Aug-29-19 Downgrade Raymond James Outperform → Mkt Perform
Jul-26-19 Upgrade Keefe Bruyette Mkt Perform → Outperform $32 → $36
Jun-18-19 Upgrade BMO Capital Markets Market Perform → Outperform
Apr-30-19 Downgrade Atlantic Equities Overweight → Neutral
Apr-17-19 Downgrade Jefferies Buy → Hold $32
Apr-04-19 Initiated HSBC Securities Hold $29
Jan-09-19 Upgrade UBS Neutral → Buy
Jan-09-19 Upgrade Edward Jones Hold → Buy
Jan-07-19 Downgrade Macquarie Outperform → Neutral
Jan-02-19 Reiterated Barclays Equal Weight $37 → $34
Jan-09-18 Downgrade Societe Generale Buy → Hold
Bank of America 1 Day Moving Averages
Name Value Action
Exponential Moving Average (5) 33.72 Sell
Simple Moving Average (5) 33.84 Sell
Exponential Moving Average (10) 34.13 Sell
Simple Moving Average (10) 34.37 Sell
Exponential Moving Average (20) 34.39 Sell
Simple Moving Average (20) 34.71 Sell
Exponential Moving Average (30) 34.33 Sell
Simple Moving Average (30) 34.80 Sell
Exponential Moving Average (50) 33.87 Sell
Simple Moving Average (50) 34.15 Sell
Exponential Moving Average (100) 32.61 Buy
Simple Moving Average (100) 32.12 Buy
Exponential Moving Average (200) 31.17 Buy
Simple Moving Average (200) 30.41 Buy
Ichimoku Cloud Base Line (9, 26, 52, 26) 34.10 Neutral
Volume Weighted Moving Average (20) 34.76 Sell
Hull Moving Average (9) 33.39 Sell