Bank of America Corp. was one of the most severely damaged stocks during the 2007-2009 crash. Shares plunged over 95% from above 55 dollars a share in November 2006 to as low as 2.53 in February 2009. The stock has been recovering ever since, but currently slightly above 15.30, it is still nowhere near the pre-crash levels. What does this slow progress mean for Bank of America’s long term prospects? The Elliott Wave Principle might help us come up with an answer.
In the recently published “Bank of America Twenty Months Later” we came to the conclusion it is probably a good mid-term bet. The above-shown logarithmic monthly chart, however, makes us believe it might be a good long-term one, as well. It makes the entire price development since the mid-1970s visible. Over 40 years of data reveal that the stock has been rising impulsively until November 2006, when wave V of the I-II-III-IV-V sequence came to an end. The Wave principle states that every impulse is followed by a correction in the other direction. In this respect, the following 95+% crash is just that – a natural three-wave A-B-C retracement of the previous five-wave rally. The theory also says that once a correction is over, the larger trend resumes in the direction of the impulsive pattern. In other words, if this is the correct count, Bank of America could be expected to continue rising and reach new all-time highs in the years ahead, which, in our opinion, makes this stock look like a good investment opportunity to jump into.
