Trading an issue after a company announces can be a difficult task. The reason being, larger market participants are looking to unload or acquire large blocks of shares and a retail trader can easily get run over.
However, by using some simple technical analysis a trader can benefit from the volatility. In Thursday’s session, the premarket price action in Bank Of America (NYSE:BAC) was dissected and the implications for the upcoming session make it the PreMarket Prep Stock Of The Day.
Low Bar To Clear: One advantage of reporting after one of your peers in a sector is that the company reporting may temper expectations for the latter. With respect to Bank Of America, it benefitted from JPMorgan & Chase’s (NYSE:JPM) mixed report.
As a result, the issue was sharply lower in Wednesday’s session and declined $4.36, or 2.6%, from $165.36 to $161. In response, Bank Of America fell in sympathy, declining $0.40 or 0.9% from $43.54 to $43.14.
Surprise! Before the open, Bank Of America reported quarterly earnings of $0.85 per share, which beat the analyst consensus estimate of $0.71 by 19.7%. The company reported quarterly sales of $22.80 billion, which beat the analyst consensus estimate of $21.78 billion by 4.68%.
The EPS beat and revenue beat on both metrics had it firmly in the green during premarket trading.
PreMarket Prep Take: When Bank of America was being covered on the show, it was trading at the $44.40 area. Co-host Dennis Dick discussed Bank Of America’s advantage of reporting after JPMorgan, which had set a lower bar to clear to impress the Street.
With the issue already trading sharply higher, the author of this article pointed out that there is one major resistance level for the issue on the upside. That being the trio of consecutive highs from Oct. 7 ($44.87), Oct. 8 ($44.81) and Oct. 11 ($44.81).
Price Action: After a higher open, the issue made a run at the aforementioned resistance level, but came up shy only reaching $44.77 and reversed course. The ensuing decline found support just under the top of Wednesday’s range ($43.64), falling to $43.48.
Since making that low, it has sharply rebounded and as 3:15 p.m. is approaching the early morning high, which is just under the trio of highs mentioned above.
Photo: Mike Mozart, Flickr