Day Movers

What the Technicals Say About Bank of America Corporation (BAC)

During the recent trading sessions stock of Bank of America Corporation (NYSE:BAC) was gathering the crowd in the stock market. At the end of the day, it’s only a stock’s performance that matters. With this in mind, it’s worth taking a look at the chart to get a sense of where it might be headed in the future.

How has the stock performed recently?

Bank of America Corporation (NYSE:BAC) has been trading in a bullish manner, based on the relative positions of the stock’s 20 and 200 day moving averages. In the last month, the price of BAC has decreased -0.22%. Shares are now up over the past year, outperforming the broad market by -100% and outperformed a peer group of similar companies by 501%. After the latest session, which saw the stock close at a price of $31.12, BAC sits below its 52-week high.

Momentum indicators

Of course, these surface-level price movements don’t tell us much about the direction that BAC may be headed in the future. In order to predict this, technical analysts look at momentum indicators, which measure the speed and magnitude of these price movements. The idea is that as momentum slows, it may signal the approach of key support or resistance levels and a reversal of recent trends. Two such indicators are the RSI (Relative Strength Index) and the Stochastic %k Oscillator, which fluctuate on a scale of 0 to 100. A reading above 70 indicates that a stock is overvalued, and a reading below 30 implies that it is undervalued. The 20-day RSI for BAC is 53.39%, which suggests that the stock is not particularly expensive or cheap, and not predisposed to a reactive price movement based on this measure. The 20-day Stochastic %k measure, which sits at 35.62%, tells a similar story, and suggests that BAC currently trades in neutral territory.

What do the trading volumes reveal?

Price isn’t the only tool analysts use to forecast future performance. Volume patterns can also reveal some important insights. If, for instance, a stock’s volumes suddenly increase by a significant amount, it’s usually a sign that the level of conviction behind the trade is high. Investors may feel very strongly about the future direction of the stock in question. Bank of America Corporation (BAC) average trading volume of 90,677,250 during the past month is 26.95% above its average volume over the past year, indicating that investors have been more active than usual in the stock in recent times.



What do the analysts think?

BAC is currently undervalued by -8.55% relative to the average 1-year price target of $34.03 taken from a group of Wall Street Analysts. The average investment recommendation on a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell) is 2.10, which implies that analysts are generally neutral in their outlook for BAC over the next year.

How risky is the stock?

Absolute price performance isn’t the only thing analysts consider when predicting future performance: volatility matters as well. Beta, which measures the stock’s volatility relative to the overall market, is a simple but effective metric for assessing risk.

Bank of America Corporation (NYSE:BAC) has a beta of 1.33, compared to a beta of 1 for the market, which implies that the stock’s price movements are more extreme than the market as a whole. BAC therefore has an above average level of market risk. During the past couple of weeks, BAC average daily volatility was 38.15%, which is -16.29 percentage points higher than the average volatility over the past 100 days.




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