Bank of America Corporation (BAC) is trading lower by about 3% in Thursday’s pre-market session despite beating top and bottom line second quarter 2020 estimates. Revenue decreased 3.5% year over year to $ 22.3 billion, but credit loss provisions grew by $ 5.1 billion, with a $4.0 billion reserve build because of the uncertainty as a result of the COVID-19 pandemic. Net interest income decreased 11% due to the decline in interest rates that have made it more difficult for commercial banks to take profits.
The reaction to the second quarter banking sector results were less than spectacular this week, the Dow component JPMorgan Chase & Co. (JPM) is the only one of the four large commercial banks at the post office, even a modest one, upside down. This attitude reflects the growing fears over a long protracted recession, which will dampen the business of the activity for months or years to come. The group is highly cyclical as a result of this connection, increasing the chances that many components will eventually retest their first quarter lows.
Bank of America’s Long-Term Chart (1991 – 2020)
A sharp decline bottomed out at a split-adjusted $4.22 in 1991, leaving behind a slight rise that has completed a cup and handle breakout in 1995. The stock posted impressive gains in the 1998 high of $44.22 and reversed when the Asian Contagion reached its peak in 1998. Who has scored the highest for the next six years, to the front of a complex of the downtrend which has found support from the teens in December 2000.
The stock has broke above the 1998 high in 2005, the reservation of the limited gains in the fourth quarter of 2006, when it topped out in the middle of$50. The subsequent decline accelerated in a near death spiral during the economic collapse of 2008, finally coming to rest in a multi-decade low in the depths of single digits in March 2009. The subsequent bounce blocked in the upper teens to just a year later, establishing a barrier that has taken six years to overcome.
An escape after the presidential election of 2016, has caught fire, making rapid progress in March, 2018 high at $33.05. The price action carved out a bullish inverse head and shoulders pattern in October 2019 and has flared up again, with less than three points above the 2018 peak in January 2020. The stock has plunged with the global markets about seven weeks later, the failure of the escape, before finding support at a three-year low in the upper part of adolescence.
Bank of America Short Term Chart (2018 – 2020)
The balance volume (OBV), the accumulation-distribution indicator completed a round-trip in March 2017 high – (red line) in December 2019 and broke. He turned tail in February, in the absence of the session before dropping to a 15-month low in April. The interest of purchase, since then, has made little progress, covering about half of the prior decline. This is proportional to the price action in the first half of the year 2020, providing neither wind, nor a tailwind to Bank of America investors.
The rally will be in January 2020 reversed at the .618 Fibonacci retracement of the 2008 to 2009 decline in the market, while the rebound in June 2020 reversed at the .618 Fibonacci retracement of the first quarter of decline. This symmetry highlights a downward movement of the long-term prospects that could eventually trigger a breakdown through support in the upper part of adolescence. Conversely, it will now take an impulse purchase to the low $30s to improve the deterioration of the technique.
The Bottom Line
Bank of America’s stock did not stir buying interest after a mixed second quarter for 2020 earnings report and sold it to the below 50-day exponential moving average (EMA) ahead of Thursday’s opening bell.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.