November 27, 2012
Been watching Bank of America as a trade. The chart is setting up a nice cup with handle. My feeling is that almost 4 years after the 2009 low, BofA is setting up to make a move into new 52 week highs. High is 10.11. Placing a buy-stop order to purchase BAC shares above the market at 10.12.
BAC has a balance sheet with $600 billion in cash and close to a trillion in current assets. Trailing two month operating cash flow is $30 billion. The bank trades for 3.28 times free cash flow and less than half of book value. The bank is successfully cutting costs and improving its capital position. This will allow for an increase in the dividend and initiation of a share buyback program, if the Fed approves.
If BofA breaks above 10.11, I want to see it do so on high volume, and close substantially above that amount. This shows the big institutions are behind the move. When filled, stop will be immediately placed.
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