Bank of America, one of the world's largest financial corporations, published the quarterly report on April 18. The market participants have reacted positively to the company’s financial results, and the price of shares has risen by 3,5%. Is it possible to expect further growth?
Bank of America has succeeded to show quarter results that exceeded the market forecasts both by revenue ($ 23.23 billion with expectations of $ 23.18 billion) and by the earning per share ($ 0.8 with expectations of $ 0.74). The decrease of the net profit on a year-on-year basis (-12% to $ 7.1 billion) doesn’t seem too negative: in 1 quarter of 2021, the windfall profit ($ 2.7 billion) has been received from the significant dissolution of reserves created during the Coronavirus epidemic. Such a situation occurs in almost all financial corporations.
The reduction of operational expenses by 1.3% (to $ 15.3 billion) stands out. With the highest inflation rate in 40 years, the possibility to control the expenses (or even to reduce them) characterizes the company's management efficiency in a very positive way.
The increase of the Federal Reserve Interest Rate can additionally support the financial results of Bank of America. Traditionally banks increase the loan rates more than the deposit ones and increase the interest income. Moreover, the company has one of the highest shares of interest-free deposits and loans with a floating rate, i.e. for Bank of America, the growth of interest rates is most beneficial compared to competitors.
From the technical point of view the shares had reached the minimum from July 2021. The publication of the quarterly report has activated the growth impact which has created the “bullish engulfing” — the signal for trend reversal. The RSI indicator has entered the zone of extreme oversold, and its reversal also will confirm the upward rollback.
The levels of Fibonacci retracement at 38.2% (point 40), 50% (point 40.9), and 61.8% (point 41.8) as the goals for growth.
The following trading strategy options can be suggested:
Buy Bank of America at the price within the range of 38,1-39. Take profit 1 – 40. Take profit 2 – 40,9. Take profit 3 – 41,8. Stop-loss – 37,2.
Also, traders can use a Trailing stop instead of the fixed Stop-loss at their disposal, when the price moves up.