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Bank of America and the So-Called Trump Rally

Bank of America stock proves that you cannot rely on politics for your investments

Our previous article on the subject, titled “Bank of America: A Good Long-Term Bet?” was published on August 24th, 2016. Two and a half months before Donald Trump’s election for president, while the stock was trading near $15.30, the Elliott Wave Principle was already preparing us for a major rally in BAC. Now, everyone calls it “the Trump rally” and financial stocks have been among the biggest beneficiaries. Bank of America, in particular, rose from $17 to as high as $25.80 between election day and March 2nd, 2017.

Recommended reading: BAC: A Good Long-Term Bet?

However, shares tumbled to $22.45 yesterday. According to mainstream media, it is because the Trump rally was “waning“. OK, fine. It looks like everything could be explained with Trump, if you really want to. But since you already saw that Bank of America was going to rise with or without Trump, let’s see what we should expect from now. The next chart allows us to examine the Trump rally through an Elliott Wave perspective.
bank of america trump rally 23 march 2017
It seems the rally Trump is so proud of, was nothing more than a natural third wave within a five-wave impulse. That third wave, labeled as (iii), ended at $25.80, so the current pullback is supposed to be wave (iv). The bears would probably test the lower line of the price channel, before the bulls return and lift Bank of America again in wave (v) of 1 of (3). When this happens we are likely going to hear that the Trump rally has resumed. Unfortunately, if this is the correct count, it would cool off again very soon, since every impulse is followed by a three-wave correction in the opposite direction. In this case, a retracement in wave 2 should follow, before Bank of America’s uptrend could really continue in wave 3 of (3).

In conclusion:

  • Bank of America was supposed to jump anyway
  • The current drop is not Trump’s fault, either.
  • BAC is still in a long-term uptrend

So, if you want to continue having no idea what is happening in the stock market, watch what Trump is doing. If not, give the Elliott Wave principle a chance.

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