Major Rally Ahead for Bank of America?


Bank of America was in a vulnerable spot earlier this month.  After the first September session the stock closed below its 200 day moving average for the next days.  This potentially damaging breakdown, which drove shares below the July and August lows, was the first time BAC fell below the 200 day moving average since August of last year.  The stock looked headed for new 2017 lows just two weeks ago.

BAC quickly regained its footing on Monday September 11th.  A steep sell off in the bond market lit a fire under the entire banking/financial sector.  BAC has continued to climb since while short term rates have risen to new yearly highs.  As this week comes to a close BAC has returned to heavy resistance near the August highs after rebounding over 10% from the September lows.  The stock is still range bound but is setting up well for a powerful breakout. 

Since early March Bank of America has been tracing out a very orderly consolidation pattern.  Before peaking March 2nd the stock had gained over 50% during the post election rally.  This major move pushed shares well into overbought territory.  Over the last seven months BAC has worked off this condition and is now poised for a fresh rally leg.

A key hurdle for BAC in the near term is the August high near $25.35.  Once this level is convincingly taken out we expect the stock to pick up momentum.  A move well into new 2017 high territory would not be difficult as the seven month consolidation gives way to a fresh rally leg.  As this develops BAC remains in a very low risk buy zone.  On the downside, a close back below this week’s low would indicate more sideways action will be needed before BAC is back in rally mode.

At the time of publication we are long BAC in most managed accounts.




Russia that is:



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The Long View

bull markets

All good things come to an end, someday. 

Note the two steep pullbacks during the final stages of the longest bull run(green data)in history.


If You Need A Good Laugh

Is Costco Poised For A Rally?


Shares of retail giant Costco have been tracing out what is developing as a very solid base.  This process has been quite volatile since the start of July but has shown signs of stabilization this month.  COST still has a few key hurdles to clear but we believe the stock is headed for higher ground.  A rally from current levels could be substantial.

Costco has trading very near its 2017 peak shortly after its last earnings report as June began.  This bullish action was quickly wiped out with a massive breakdown gap on June 16.  COST fell over 7% that day on its heaviest selling pressure in years.  This Amazon/Whole Foods inspired flush damaged the stock severely.  Less than a month later COST had dropped another 12% as it stretched the sell off from the June peak to over 18%. 

In early July COST began to stabilize near major support.  This key zone, between $154.00 and $150.00 allowed the stock to regain its footing.  This area was successfully retested in late August confirming an important low was in place.  COST has been steadily recovering this month and has left behind layers of nearby support.  We believe the stock will need to clear the $166.00 area soon to be clear for take off.  Once past the 200 day moving average, as well as the July and August highs, there is plenty of upside potential.  As this develops we regard the $162.00 to $159.00 area as a low risk buy zone.  On the downside, a close back below $157.00 would violate last week’s low indicating more basing is ahead before a fresh rally leg can take hold.

Costco is scheduled to report fourth quarter earnings on October 5th. 

At time of publication we did not have a position in Costco.

The Most Peaceful Days in History

The intra-day range in the S&P 500 Index over the last six days has averaged 0.21%.   The least volatile trade in the history of the stock market:


Hat tip Charlie Bilello


Is United Airlines Landing?


 We have been monitoring the flight pattern of United Airlines closely since the July 19th breakdown(earnings).  This month the stock has stretched this sell to over 25% and is now very near a major support zone.  We believe this area, near the $57.00 to $56.00 levels, will provide solid support.  A new base here could supply the footing needed for a healthy rebound.  We are now long the stock($58.01)and will add on further weakness.  Additional buys at $57.51 and $57.01 are expected.  A close back below $55.00 would indicate more turbulence ahead.

UAL received a downgrade from Raymond James today.

At the time of this publication we are long UAL.


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Oracle Remains Under Heavy Pressure

Further downside will provide a very low risk entry opportunity. 


Shares of software giant Oracle suffered a major breakdown last Friday.  Following the stock’s first quarter earnings release Thursday afternoon ORCL opened the next session with a huge breakdown gap.  By the close the stock was off over 7% as selling pressure surged to its heaviest level in years.  This was as sharp reversal from the very bullish action earlier in the week.  Just last Wednesday ORCL closed at new all time highs. 

Oracle has continued to fade this week although downside momentum has begun to ease.  Despite this we expect shares to drift lower in the near term after leaving behind an ominous key downside reversal in the weekly chart.  For patient bulls a further decline will produce a very low risk entry opportunity.  As shares near $47.00 investors should be prepared to take action. 

Major support near the $47.00 to $46.00 area should be viewed as a low risk buy zone.  This key zone includes the Oracle’s initial post election peak near $47.00 as well as the powerful post earnings breakout gap left behind back in late June.  As ORCL reaches this area it will stretch the sell off from the 2017 highs to 12% and will likely enter oversold territory.  This is the formula for a bottom, at least a temporary version. 

At time of publication we are long ORCL in some managed accounts. 

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