Resurgence amid the Storm
Bank of America (NYSE: BAC) has emerged as a phoenix, soaring 52% from its late-October 2023 low, overshadowing the S&P 500’s 28% rise. The banking giant, deemed “too-big-to-fail,” navigated through the regional bank crisis of the past year. Despite facing elevated interest rates, the resilience of the US consumer and economy paved the way for record profits at BAC.
Challenges on the Horizon
However, a shadow looms over this success story. While Bank of America engaged in massive share repurchases, its earnings per share has been on a two-year decline trajectory due to slipping net income in both 2022 and 2023. Notably, net charge-offs for consumer and commercial loans have nearly doubled year-over-year, signaling a broader industry trend of rising delinquencies and charge-off rates.
Testing the Waters
Chart analysis paints a vivid picture. Bank of America stock finds itself at a critical juncture with a historical challenge. The $38-$40 zone has historically stifled any upward momentum, acting as a formidable barrier in 1999, 2002, 2008, and most recently in 2022. The stakes are high as the market gauges its response to this critical juncture.
Breaking Boundaries
While support and resistance are meant to be shattered, history tells a tale of its own. Bank of America has breached the $38-$40 barrier in 1998, 2003, and 2021. The burning question remains – will there be a breakout or a retracement? To unlock this mystery, a deep dive into the hourly charts becomes essential.
A Closer Look
The intricate dance of patterns on the hourly chart reveals a potential Elliott Wave phenomenon at play. The current rally to $38 can be viewed as a prelude to an impending major correction. A meticulous examination of wave structures strengthens the case for a looming downturn from the formidable $38-$40 resistance.
At current price-to-earnings and price-to-tangible book value ratios of 12 and 1.55, respectively, Bank of America’s stock appears to be fully valued. While further gains may be plausible, the reliance would primarily rest on market sentiment rather than robust fundamentals and undervaluation.