Bank of America Firing on All Cylinders Ahead of EarningsThe banking giant is well-positioned for additional gains following next week’s Q1 2021 earnings release.
Bank of America Corp. (BAC) is testing March’s 13-year high near 40, thanks to the relentless rise in interest rates, and is well-positioned for additional gains following next week’s Q1 2021 earnings release. Investors have taken note, lifting accumulation readings to the highest highs of the century, confirming renewed optimism that could finally signal a successful assault on 2006’s all-time high in the mid-50s.
Trading Derivatives carries a high level of risk to your capital and you should only trade with money you can afford to lose. Trading Derivatives may not be suitable for all investors, so please ensure that you fully understand the risks involved, and seek independent advice if necessary. A Product Disclosure Statement (PDS) can be obtained either from this website or on request from our offices and should be considered before entering into a transaction with us. Raw Spread accounts offer spreads from 0.0 pips with a commission charge of USD $3.50 per 100k traded. Standard account offer spreads from 1 pips with no additional commission charges. Spreads on CFD indices start at 0.4 points. The information on this site is not directed at residents in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
Infrastructure Investment Paying Off
The Federal Reserve added to positive sentiment in March, announcing that all restrictions on bank dividends and share repurchases will end for most firms after June 30. The central bank allowed limited dividends and buybacks in the first quarter as part of the recovery from 2020’s pandemic-driven system shock. Banks have built a sizable cash hoard in the improving economic conditions and could deploy that capital aggressively when the last chains come off.
CEO Brain Moynihan outlined growing tailwinds in a recent interview, noting “The key is we’ve been able to invest $3.5 billion a year in technology. We’ve been able to open up branches in many new cities. We’ve been able to raise minimum wages, while we’ve kept expenses down. Now that’s the magic in a franchise, so when rates rise, which they will at some point—and when they did in ’16 and ’17—the earnings rise sharply, because we have no more expenses to deploy and all the revenue that comes in from the deposit base.”
Wall Street and Technical Outlook
Wall Street consensus stands at an ‘Overweight’ rating based upon 15 ‘Buy’, 3 ‘Overweight’, and 9 ‘Hold’ recommendations. One analyst now recommends that shareholders close positions and move to the sidelines. Price targets currently range from a low of $30 to a Street-high $45 while the stock closed Friday’s session less than $2 above the median $38 target. Look for ratings and targets to go higher if Bank of America posts strong first quarter results.
The stock fell to a 26-year low in 2009 and turned higher into the new decade, stalling in the upper teens in 2010. It finally cleared that resistance level after the 2016 presidential election, stalling at the .618 Fibonacci retracement of the 2006 to 2009 decline in October 2019. The March 2020 selloff printed the third higher low since 2009, yielding a breakout that’s now targeting the .786 retracement in the low to mid-40s.
For a look at all of today’s economic events, check out our economic calendar.
Disclosure: the author held no positions in aforementioned securities at the time of publication.