Oct 1 (Reuters) - Bank of America shares have been falling since mid-August and could slide another 7% or so from where they are now, technical analysis suggests.
The shares began retreating after hitting an all-time intraday high of $65.22 on August 17, according to data supplied by LSEG.
Their initial move lower was followed by a pause while the stock moved sideways through early September, but it resumed the fall in earnest after CEO Brian Moynihan was reported as saying on September 14 that he expected investment banking fees to drop by at least 10% in the third quarter, while sales and trading revenue will be flat.
One thing technical analysts look for in a falling market is something called a “support,” a price level that acts like a floor. The stock’s behavior around such support levels can determine whether the shares continue falling or pause before the next move.
Bank of America shares appeared to find support when they fell to a roughly 3-1/2-month low of $55.73 last week. That level was just above the halfway point of the stock’s rally from March to August. That kind of level is called a retracement - a reversal of a certain percentage of a previous move.
Retracements are closely watched by analysts as potential support. In this case, the wider area around those levels is also what chart watchers call structural support, an area where the share price has stopped on previous occasions.
After holding above there for several sessions, the stock fell below it this week, heralding a new phase of losses.
When a stock is falling, one thing technical analysts try to understand is the staying power of the move using technical tools that gauge volatility and momentum.
One such tool is called Bollinger Bands, a moving average system that measures volatility. When the bands are widening, the move is picking up steam, which is what is happening with Bank of America.
Similarly, a tool called Moving Average Convergence Divergence also shows that the down move has momentum.
Another device analysts use is the Relative Strength Index, which indicates whether a price is oversold or overbought — which assesses whether a move is likely to continue without pausing.
And, a key test with RSI is how it behaves when a new low in price is struck. Currently, RSI is oversold, but it has been confirming each new price low by hitting a low of its own, including on Wednesday.
Based on the current momentum, Bank of America shares appear headed for potential support levels near $52.4 and then 50.35-50.65, which coincides with previous daily highs and lows – structural support – as well as another retracement of the March-August rally.
If, however, the shares can rise above the $58.50, then the slide could come to a halt.
A spokesperson for Bank of America declined to comment.
What the chart shows:
Bank of America shares sliding since mid-August
Targets for further declines are: $52.40 and then $50.35-$50.65
A rise above $58.50 could bring the slide to a halt.
(Mapping the Market is a daily column written by Reuters journalists. The commentary is based on a technical analysis of financial charts, which helps assess the likelihood of future price moves but does not guarantee the outcome. The column does not constitute investment advice or trading recommendations. )
Christopher Romano is a Reuters market analyst. The views expressed are his own; Editing by Burton Frierson and Jamie Freed
