Stock Trading Predictions & Technical Analysis: BAC - Possible Dark Cloud Formation and Head & Shoulders

Wednesday, September 9, 2009

BAC - Possible Dark Cloud Formation and Head & Shoulders

I announced last week that I had taken a short position on BAC at $16.96, after seeing bearish big long down gap. Today if BAC, closes down or flat, the dark cloud formation will be confirmed. Further fueling the possibility that we are at a top is that we are starting to see a head & shoulders formation, which will only be confirmed once it breaks the neck line ($16.00-$16.25). This could then lead BAC to its 50 day moving average, which is at $15.00, and if broken could fall to around $13.50. Seeing many consecutive bearish signals, is uasually a sign of a top. However none of these signals are yet confirmed, and only when they are can we officially call it a top. Seeing C all, which is usually very positively correlated with C, makes me believe also that BAC will continue on this path down.

Short BAC @ $16.96 - Stop Loss: $18.02

2 comments:

DBSeptember 10, 2009 at 5:55 PM
Yoel,

Bank Of America seems to be showing some resistance at $16.75, also noticed a jump before the close today. Whats your take on it.
Thanks,
DP
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YoelSeptember 10, 2009 at 6:06 PM
BAC actually has support at $16.75. (support: price levels where prices have a tendency to bounce up from; resistance: price levels where prices have tendency to bounce down from). for the moment, the possibility of a head & shoulders formation is still valid, but the dark cloud formation has failed to occur.BAC is also facing strong resistance at $17.50. Whichever way it breakout may indicate the direction BAC will actually follow. Right now BAC is trading sideways, this is a battle of the bears vs. the bulls.
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TECHNICAL INDICATORS

BUY SIGNAL: Indicates the possibility of the start of a new up trend or the continuation of the current up trend. This signal may be often given in the early stages of a potential new up trend that was preceded by a down or sideways trend. Such signals do not always succeed and may fail at time.

BUY: Indicates that the current up trend is already in motion and a BUY SIGNAL was already given earlier. A BUY does not necessarily indicate that the stock will continue higher from here, but simply that the stock is trending up. The further into the trend you decide to take a long position, the more risk you have of seeing it reverse back down sooner rather than later.

STRONG BUY SIGNAL: Indicates a stronger, more significant and reliable signal than a BUY SIGNAL which usually has less chance of failing. Such signals do not always succeed and may fail at time.

STRONG BUY: Indicates that the current up trend is already in motion and that STRONG BUY SIGNAL was already given.

SELL SIGNAL: Indicates the possibility of the start of a new down trend or the continuation of the current down trend. This signal may be often given in the early stages of a potential new down trend that was preceded by an up or sideways trend. Such signals do not always succeed and may fail at time.

SELL: Indicates that the current down trend is already in motion and a SELL SIGNAL was already given earlier. A SELL does not necessarily indicate that the stock will continue lower from here, but simply that the stock is trending down. The further into the trend you decide to sell a position, the more risk you have of seeing it reverse back up.

STRONG SELL SIGNAL: Indicates a stronger, more significant and reliable signal than a SELL SIGNAL which usually has less chance of failing. Such signals do not always succeed and may fail at time.

STRONG SELL: Indicates that the current down trend is already in motion and that STRONG SELL SIGNAL was already given.

HOLD: Indicates that traders who already hold this stock, should hold on as long as the trend persists. This signal is usually given during an up trend for which it would be considered too risky to take a long position at this point.

STRONG HOLD: Indicates that the current trend has been in motion for a while and rarely deviated away from the trend. Although the stock may continue higher, there may not be enough potential up side to trigger a BUY SIGNAL. This type of indicator usually means that the stock has very strong support levels which may have been tested but not broken.

WAIT: Usually given during a sideways trend for which we are waiting for a move that would trigger a BUY SIGNAL or SELL SIGNAL. This could also indicate uncertainty and the risk that would be taken if you were to take a long position at the current level. Taking a long position after giving a WAIT indicator is considered a gamble.