Bank Of America Charges Higher In Tandem With JPMorgan, Citigroup: A Technical Analysis

Bank of America Corporation BAC gapped up almost 3% higher on Friday, in tandem with JPMorgan Chase & Co JPM and Citigroup, Inc C, which were spiking higher after reporting better-than-expected earnings.

Bank of America is set to print its first-quarter earnings on April 18 and traders may be betting the bank will also beat expectations. Analysts expect Bank of America will report earnings of 84 cents per share on revenues of 25.64 billion.

From a technical standpoint, Bank of America was also reacting bullishly to an inverted head-and-shoulder pattern on the daily chart.

See Also: Major Bank Profits Surge More Than Expected In Q1, Drawing Customer Deposits From Smaller Players

An inverted head-and-shoulder pattern can be either a powerful reversal indicator when found at the bottom of a downtrend or a continuation pattern found in an uptrend.

The pattern is formed when a security forms a rounded or V-shaped trough and then rises (right shoulder) followed by a second deeper downturn and accompanying rise (head) and then by a third trough and rise that is shallower than the second (left shoulder).

The inverted head-and-shoulder pattern has a neckline, which is drawn using a straight ascending, descending or horizontal trendline across the peaks in the pattern.

When the security breaks up through the neckline on higher-than-average volume, it indicates the pattern was recognized and a rally may follow.

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The Bank of America Chart: Bank of America’s inverted head-and-shoulder pattern was formed between March 13 and Thursday, with the left shoulder created between March 13 and March 21, the head formed between March 22 and March 30 and the right shoulder created over the trading days that followed.

• On Friday, Bank of America burst up through the downward sloping neckline on high volume, which indicates the pattern was recognized. The measured move of the head-and-shoulders is about 10%, which suggests the stock could rise toward the $32 mark in the future.
• Bank of America also confirmed a new uptrend on Friday by forming a higher high. The stock’s most recent higher low to negate its downtrend was created on Thursday at $27.65. On Friday, Bank of America looked to be printing a shooting star candlestick, which could indicate another retracement lower is in the cards for Monday.
• Bank of America has resistance above at $29.65 and $30.36 and support below at $27.65 and $26.32.