Stock Of The Day – Here's Where Bank Of America's Rally May End

Shares of Bank of America Corporation BAC continue to move ahead. The company posted earnings of 90 cents per share, ahead of the 81 cents analysts were looking for. Revenue was also ahead of estimates. The Street was looking for $26.99 billion and it came in at $27.37 billion.

But this move higher may soon end or pause. There is a good chance the stock will run into resistance around $39.70. In March, this level was support, and in the stock market, support levels frequently convert into resistance. This is why our technical analysis team has made it our Stock of the Day.

As you can see on the chart, the $43.25 level was support in December.

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Many of the people who purchased shares at this support were happy when they rallied. They thought their decision to buy was a good one.

But when support broke in March and the price moved lower, some of these buyers came to believe they had made a mistake. A number of people held on to their losing positions, but they also decided that if they could eventually exit their positions at breakeven, they would.

As a result, when the stock rallied back to $43.25, they placed sell orders at their buying prices. The large concentration of these sell orders made resistance form at the same price that had previously been support.

After hitting support, Bank of America rolled over and trended lower. This happened when some of the investors and traders who wanted to sell reduced their prices because they knew the buyers would go to whoever was willing to sell at the lowest price.

This selling resulted in a snowball effect when other sellers also reduced their prices.

The $39.70 level was support in March. If BAC rallies back to this price, there’s a good chance it will find resistance at this level as well.

Some of the disappointed buyers who paid $39.70 for their shares will enter the market as sellers if and when the stock returns to that price. This could end the move higher.

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