Let’s take a look at Bank of America’s (NYSE: BAC) stock price over the last year…
BAC dropped from $15 to $5 in 2011. That’s a significant 67% drop.
During that time the Money Flow Index (MFI) was reading very low values. This confirmed what the stock’s price suggested: there were no buyers.
By the end of 2011, BAC found support (read: buyers) at $5. This is a key price because many institutional portfolios can’t hold stock worth less than $5.
After bouncing off $5 twice, the Money Flow Index showed investors putting money back into BAC. Then the MFI hit the upper threshold of 80 for the first time in over a year. This new surge in buying interest kick-started the rally that took BAC from $5 to $10.
But $10 was a zone of resistance – the 50% Fibonacci retracement level of the $15-to-$5 downtrend. Just as BAC was hitting resistance at $10, the Money Flow Index was popping over 80 again. This time, the MFI was suggesting exhaustion… buyers had run out of steam.
With the buyers taking a break, BAC has pulled back to $8, losing 20% in just a few weeks.
BAC seems to have a floor at $5 and a ceiling at $10. Watch for BAC to trade in this range as the market fully digests the quality of the bank’s books.
Recent Articles by
If “buy-and-hold” and the notion that you can’t beat the market have left you short of your personal and retirement goals, then you’re going to want to hear the truth about passive and active investing.
Chances are, if you’re more than 25 years old, you think it’s impossible to “beat the market!”
But today, there is MORE than ample evidence that proves:
- The stock market is NOT perfectly efficient
- Passive investing can be MORE risky than active investing
You CAN beat the market… you just need to use the right strategy!