BAC Bank of America

Poor Paulson- considered one of the best managers out there, he had BAC as a top 5 holding in 2011 with something like 124 million shares, the fund lost -55% for 2011 and he sold BAC right around the bottom at the $5 area just to see it come thundering back, his other top 5 holding was GLD which was his only profitable top 5 holding which he had to sell to meet redemption requests.

I have to say, this isn't one of my favorite stocks, although I've used Calls and Puts for quick 1 day trades and have done well from 10-55% in a day.

Something seems to be going on with BAC, it looks a bit transitional here.

 While my gut tells me before too much longer BAC will be under $7.50 again, I have to respect the chart which shows a stage  1 base and stage 2 mark up, this is probably one of the best examples of the 4 stages, BAC topped in 2010 (Stage 3) and then through 2011 was in a stage 4 decline, the whole process started over with a stage 1 base seen above and stage 2 mark up since the breakout.

 Here on a daily chart we see what looks like a distribution day with a long upper wick on the candle and heavy volume, that day has acted as resistance since and of course the move is a bit too parabolic for my liking.

 On a 60 min chart there's a triangle, this would be assumed by technical traders to be a bullish continuation pattern, volume is right for it, but did we just see a head fake move this morning in yellow? You know how Wall Street likes to take technical traders to the cleaners and this is a very obvious pattern in a widely watched stock.

 The daily Bollinger Bands show in green a healthy walking of the upper band, however when they have popped outside the band, they have seen a pullback, we have 5 days now outside the BB's.

 On an hourly chart volatility is squeezing suggesting a highly directional move, the question is whether it's a head fake move and BAC pulls back, which should be a substantial correction or not, I tend to think BAC will pullback, but how it gets there is the question.

 My Trend Channel has held the recent move up perfectly, although it did stop out recently at the red trendline/arrow and the channel has been lateral since 960 min). The ATR is also decreasing and the "Close within range " indicator at the bottom is biased toward the negative.

 Here's the daily 3C chart showing the stage 1 base accumulation, then confirmation at the green arrow and now a negative divergence, it' not a huge negative, but enough for a decent size pullback.

 Here the 30 min chart has gone leading negative in a flat area of trade, which is where we commonly see distribution.

The 15 min chart shows the same

 The 2 min chart is leading negative in to that flat area, it looks worse then the longer charts because the shorter timeframes flow in to the longer ones.

 Here's a wider view of the 2 min, note the negative divergences sending BAC lower and the leading negative since at least the 19th. There is a small positive divergence now, today at the white box, again, this could be part of a head fake move as it is very small compared to the longer trend.

The 1 min chart shows a negative divergence on the open sending BAC lower and has been in line since.

Right now BAC is just above the triangle at $9.90, keep an eye out for a head fake move and a move in BAC below the triangle, at $9.50 the had fake would be pretty well confirmed. If that move came today, it would also create a very bearish engulfing pattern on the daily chart, highly suggesting a reversal/pullback.

I favor options on BAC as they can really move and fast, but even a straight short should be profitable if longs get trapped in a head fake move