BoA signals bearish reversal after going ex-dividend

Bank of AmericaBank of America’s Stocks (NYSE: BAC) has reached $21.19 from $16.80 as on 2nd November 2016. There is an appreciation of 30% of the stock prices of this company.

This Charlotte, North Carolina-based bank has reported earnings of $4.96 billion or $0.41 per share on total revenue of $21.635 billion during the 3rd quarter of fiscal 2016. Both revenue and earnings of this bank have exceeded the estimates predicted by the Wall Street.

The stocks have turned bullish after the Q3 2016 results. The stock’s rally got an additional thrust after the recent victory of Donald Trump in the Presidential Elections of USA. We are expecting a short-term correction in the stock based on the details mentioned below.

Bank of America’s shares is trading ex-dividend starting last Wednesday. The stock trades at a premium until the ex-dividend date. Once the ex-dividend date passes, the price of the stocks gets lowered because investors do not get any dividend. So, we can easily anticipate the stocks of Bank of America to experience a short-term weakness because it has gone ex-dividend in the last week.

Bank of America

Based on the closing figure last Friday, the annual yield of BOA is coming to 1.4% approximately whereas that of S&P500 Index is 2%. So we can easily deduce that the interests of the investors in the stocks will take a dip shortly.

According to the analysts, they have given a 12-month target price of $18.70 for Bank of America’s stocks. This means that the stocks would correct themselves soon and align itself in line with the fundamentals.

According to recent settlement date’s data, there has been an increase of 23% to 148.7 million shares in the number of short positions in the market as compared to 121.1 million shares two weeks before. It is an indication that a large number of participants believe that the stocks have risen too much in a minimal period.

Later this month, the Fed is looking forward to raising the benchmark interest rate. This would surely add several billions of dollars to the top line of Bank of America. The share prices of the bank are also reflecting most of the monetary gains after the recent rally. Thus, it would be wiser to bet on the decline of the share prices of this bank.

Bank of America Stock Price: December 6th 2016

Bank of America Stock Price: December 6th, 2016

Technical analysis reveals that the stochastic oscillator is already moving in the overbought region. RSI indicator has also moved into the overbought zone. So, it is an ideal situation to open a short position in the stock.

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