PreMarket Prep Stock Of The Day: Bank Of America

While the S&P 500 index futures were retreating off Tuesday’s open, one sector was going in the opposite direction: banking.

One issue that has revisited its multiyear highs is Bank of America Corp BAC,  the PreMarket Prep Stock of the Day.

BofA Punished After Q4 Report: On Jan. 19, Bank Of America reported quarterly earnings of 82 cents per share, which beat the estimate of 76 cents per share, representing an increase of 28% year-over-year. The company reported quarterly revenue of $22.1 billion, up 10% year-over-year.

In a volatile session, the issue opened much higher ($48.39 vs, $46.44), immediately peaked at $48.54 and weakened to end the session only pennies higher. Over the next few days, it was battered with the index and bottomed on the exact same day (Jan. 24) at $42.50.

It should be noted that was just under its December low of $42.70.

BofA's Initial Rebound: The issue did bounce back sharply and peaked on Jan 27 at $46.75 and backed off to end the session at $45.47. Just as the index was trying to put in a bottom, the bank was falling as well the next day, to $44.45, but rebounded to close in the green by 40 cents at $45.87.

BofA Has A Mind Of Its Own: Since that session, the issue has been higher in six of the last eight sessions, with the two outliers being a nickel loss and a 46-cent loss in back-to-back sessions on Feb. 2 & 3. The latter decline can be attributed to the swoon in the index following a disappointing fourth-quarter report from Meta Platforms Inc. FB.

The index has staged a mile recovery since then, but has come nowhere near its all-time high from Jan. 4. The issue has powered higher and revisited its Jan. 10 high ($50.08), peaking at $50.02 earlier in Tuesday’s session.

The BofA Catalyst: Despite the retreat after its fourth-quarter report, the issue has been on investors' “buy” radar following the more hawkish tone taken on by the Fed.

Viewers of the PreMarket Prep Show are encouraged to monitor the price action of the iShares 20+ Treasury Bond ETF TLT, as the financials will trade in the inverse direction as it tracks lower bond yields.

Coincidentally, the ETF has made a new eight-month low in Tuesday’s session.

BofA Moving Forward: From a technical perspective, the $50 resistance level has to be respected. Long-term, it has not traded over that level for an extended period of time since October 2007. More importantly, it has matched its January high ($50.02 vs. $50.08) and backed off under $49, and is now trading actively in the lower $49 handle.

While a breakout over $50 may be on the horizon, the issue may need a few days of consolidation in the $49 handle. Perhaps a few daily closes in the upper $49 handle will provide the foundation to clear out the institutional sellers perched at the psychological as well as a technical resistance area.