The latest rally in the US stock market kicked off with the arrival of September and has taken with it many of the important sectors in the S&P 500, including the financials. As a result the SPDR Financial Sector ETF (XLF) is higher by just about 3.80% month-to-date, and continues to act strong. On Tuesday September 10th the sector ETF managed to gap past a confluence zone made up of its 50 day simple moving average (yellow line) and a horizontal resistance line. While not all stocks within the ETF look great, many of the more important stocks do look juicy for more upside, including Bank Of America (BAC).
On the eighteen month logarithmic chart of Bank Of America (BAC) it is clearly evident that the stock remains holding on to its late 2011 up-trend and over the past twelve months has also respected/found support at its 100 day simple moving average (blue line). Also note that the stock continues to work higher in a series of breakouts from so called bull flag patterns (more on this on the next chart), which is keeping the stock trending higher. As the saying goes ‘the trend is your friend,’ which is why I currently see no reason to fight it but rather am looking for a continuation move to the upside.
On the closer-up chart the latest stock’s latest bull flag pattern is well displayed. After a sharp 24% rally off its June lows, the stock began to settle into a period of consolidation towards the back-end of July. On Tuesday September 10th, just like the SPDR Financial Sector ETF (XLF), the stock made a meaningful move higher and intents and purposes broke out of this bull flag formation. This now significantly increases the stock’s chances of moving toward its July highs near the $15 mark, and potentially beyond in coming weeks.
What’s further bullish about the stock of Bank Of America (BAC) is that it managed to trade higher on Wednesday despite being kicked out of the Dow Jones Industrial Average, due to a reshuffling of some of the Dow components.
Unless the stock develops a major bearish one-day reversal, odds seem to favor more upside over coming weeks.