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Is Bank of America Corp (NYSE: BAC) Recent Rally Sustainable Into the Future?

Bank of America Corp (NYSE: BAC) had a remarkable 2017 where it recorded a year-to-date increase of 35.3%. After such a run up in its price, it is only appropriate to ask whether the bank’s rally is sustainable into the future. The bank’s stock price recently surpassed the crucial $30 mark, which could lead to the stock rallying higher.

Article Summary

BAC had a stellar 2017 where it gained about 35.3% YTD.

Most analysts are upping their price targets for the bank.

You need appropriate risk-controlled strategies to benefit from the bank’s rally.

Here’s the trading report on BAC.

Many investment analysts are raising their price targets for the stock; a good example is Mike Mayo of Wells Fargo & Co (NYSE: WFC) who recently upped his 2018 price target for the stock to $35. Even as analysts raise their price targets for BAC, I would like to examine the different factors such as the regulatory environment, historical performance, and macroeconomic factors that could affect the bank’s profitability.

BAC experienced one of its worst declines during the aftermath of the financial crisis of 2008, where the bank lost about 95% of its value to hit a bottom at $3.14 a share in 2009. The bank’s massive decline was largely attributed to its large exposure to the mortgage industry as a mortgage originator. This begs the question whether there is a significant risk of such a decline happening in the near future.

It has taken BAC almost an entire decade to recover from that decline to rally past the psychological barrier of $30 driven by a variety of factors relating to the macroeconomic environment. The economic recovery in the US is gathering traction given that inflation is currently on an uptrend and the Federal Reserve is also keen on raising interest rates, which are key to the bank’s future profitability.

Under the Trump administration, the regulatory environment for financial services institutions is improving as some of the strict Dodd-Frank rules and other similar regulations are being rolled back. BAC has outperformed the Financial Select Sector SPDR Fund (NYSEARCA: XLF) in the past and if all the external factors keep improving, the bank is likely to replicate its past performance this year.  

However, it is not enough to know that bank stocks are likely to head higher this year given the improving economic environment. As an investor or trader, it is important to time your entry and exit points accurately in order to minimize risk and maximize your profit potential.

Stock Traders Daily provides risk-controlled strategies that are tailored to different trading and investment styles in order to protect your investment capital and to generate significant returns for all our subscribers.

Review Our Trading Strategies Here.

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