Chart Wars: Is Bank Of America Or Wells Fargo Headed For A Blue Sky Run First?

Bank of America Corporation BAC and Wells Fargo & Company WFC) have both formed long-term bullish chart patterns that could send each stock into an extended all-time high run.

Both Bank of America and Wells Fargo are trading in strong uptrends on the weekly chart and on Wednesday, both Bank of America and Wells Fargo settled into bullish patterns on the daily chart, which may have also provided a dip buying opportunity for swing traders not already in a position.

Although both stocks appear very strong for a weekly or monthly run into blue skies, Bank of America and Wells Fargo are both flashing signals that a short-term pullback may be in the cards, which may provide longer-term traders another opportunity to take a position.

It should be noted that events such as the general markets turning bearish, negative reactions to earnings prints and negative news headlines about a stock can quickly invalidate bullish patterns and breakouts. As the saying goes, "the trend is your friend until it isn’t," and any trader in a bullish position should have a clear stop set in place and manage their risk versus reward.

See Also: Why A Federal Reserve Interest Rate Hike Could Be Closer Than You Think

In The News: Stocks slid on Wednesday after the Federal Reserve released its minutes, which signaled the U.S. central bank may hike interest rates sooner to cool inflation and speed up the tapering of its monthly bond purchases. The minutes indicate the Fed’s stimulus program may end by March, after which it could begin to raise interest rates.

Bank of America and Wells Fargo pulled back following the announcement, but in the long run the news is likely to benefit the banks because they will thrive in an environment of rising rates. As the economy continues to strengthen, the banks could also see rising loan demand.

The Bank of America Chart: Bank of America has been trading in a strong weekly uptrend since the weeks of Oct. 26 and Nov. 2, 2020, when the stock printed a bullish double bottom pattern at the $23.12 mark.

• The most recent higher low in the weekly uptrend is at $42.70 and Bank of America must hold above that level on its next pullback.
• On the daily chart, Bank of America was printing a double inside bar on Thursday, which indicates a period of bullish consolidation. Traders can watch for a break from the pattern later on Thursday or on Friday to gauge future direction.
• Bank of America has a gap below on its chart that falls between $46.49 and $47.04. Gaps on charts fill about 90% of the time, which makes it likely Bank of America will trade down into the range. Traders may choose to wait for the gap to be filled before taking a position.
• The only resistance above in the form of price history is at $48.69 and there is support below at $47.20 and $45.36.

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The Wells Fargo Chart: Wells Fargo has been trading in a consistent weekly uptrend since Oct. 26, 2020. The most recent higher low was printed at the $46.25 level and Wells Fargo will need to hold above the level or the trend will be negated.

• On Thursday, Wells Fargo broke up bullishly from the inside bar pattern the stock formed on Wednesday, but as of midmorning, the bank was not getting the follow-through it will need for a blue sky run.
• If Wells Fargo closes the trading day near the $53 level it will print a gravestone doji pattern on the daily chart, which could indicate a pullback is on the horizon for Friday.
• Like Bank of America, Wells Fargo has a lower gap, between $50.81 and $51.52, which may provide a solid entry for a position.
• Wells Fargo’s only resistance above is at the new all-time high of $53.66 and there is support below at $51.25 and $49.85.