A little over two months ago, on July 2nd, we published an article about Bank of America stock. The price was then hovering near $28.20 a share, following a decline from as high as $33.05 in March. Fortunately, despite the 15% plunge, the Elliott Wave Principle (and the company’s fundamentals, by the way) suggested BAC stock should start recovering very soon. The price chart our analysis was based on is shown below to refresh your memory.
The decline from $33.05 looked like a perfect A-B-C zigzag correction. Wave A was a textbook five-wave impulse, followed by an expanding flat correction in wave B and an ending diagonal in the position of wave C. The trend preceding this three-wave retracement was pointing north, so it made sense to expect the uptrend to resume, once wave 5 of C completes the pullback.
Given the company’s generous share buyback program and strong earnings growth, this was one of those sweet situations, when the bullish idea receives a double confirmation – first from Elliott Wave analysis and then from the underlying business. Two months later, BAC stock bulls look determined to keep climbing the valuation mountain.
BAC stock fell to $27.64 on July 6th and then surged sharply to $31.91 by August 8th for a total return of 15.4% in just over a month! Last Friday, the market closed at $30.93, but in our opinion, it is too early to give up on Bank of America. The rally to $31.91 has a five-wave structure, meaning the current weakness is probably just a small a-b-c correction. Wave “c” of 2 might even drag the stock below the $30 mark again, but as long as BAC trades above $27.64, the positive outlook remains intact. A new all-time high by the end of the year cannot be ruled out as a possibility.
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Disclosure: The author has a long position in BAC stock.
