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The BAC Story: BofA Earnings April 2016

Layyy-dees an’ Gennelmens, step right up! We have here, coming this very Thursday, the fourteenth day of April, in our year two thousand sixteen, our very own Favorite Child, the Bank of America (NYSE: BAC), facing an unprecedented travail in a moment of crisis! Will she prevail? Come into the tent to watch the action as she struggles to defeat the evil forces arrayed against her! Step right up!

And, you simple but fair-minded folk, I ask you: What are those evil forces, eh? It’s the old story, my friends, a tale of Greed gone too far, and fair Prudence aflame at the stake. Now you, sir- I see you there clutching your BAC shares in fear and loathing, and I’m with you, you see, if you say the fair Lady BAC has resources no one knows about! But, you see, kind sir, I cannot help but notice that she’s affronted, she is, with a most suicidal device- at that, one of her own devising! Oh, what tangled webs we do weave, sir! Point being, dear neighbor, she’s on the bloody hook to lend yet more to the Oil Savages, withal another $20 billion or more, and that even as she’s suffering the slings and arrows of crashing oil prices and bankruptcies against the $20 billion already lent!

So the whole matter turns upon- yes, you had a thought to offer us, madam?… Yes, ‘tis true, fair Lady BAC has many fellow sufferers, in all to the tune of some $147 billion, including the likes of Citigroup (NYSE: C), who’s worse off than she, and JP Morgan (NYSE: JPM), Wells Fargo (NYSE: WFC), and Morgan Stanley (NYSE: MS). But surely, my dear, you’re not suggesting that a commonality of misery shall lift the curse? They may be too big to fail, but that does not mean they shall be immune from a serious drubbing along the way, does it? Well, on reflection, we withhold our judgment upon that point- and remember, History is witness only to the past, not the future. And methinks a serious geblauting is due!

Now, as I was saying, the whole matter seems to turn upon whether the Oil Savages concerned shall or shall not access their rights to further loans from the esteemed Lady BAC, may the Universe preserve her fair soul from fatal harm. See- look ye here at this rough titan of the black gold, peering, he is, into the dark abyss of insolvency and ultimate dissolution before the High Court. I ask you, what has he to lose by demanding his rightful share of promised loans from Her Ladyship? Nothing, I say, nothing! Well, he’ll owe more interest, won’t he, the which may hasten his demise. But what has he to lose?, I’m saying. You decide.

Now let us busy ourselves with a cold and calculating look at Her Ladyship’s chances of warding off a rout upon the coming Thursday, when she reports her earnings and future guidance. It’s now Tuesday, the twelfth of April, a scant 90 minutes before the close, and she’s hovering at a rather dubious $13.25, dubious because, on her daily and weekly charts, that’s rather strong resistance, isn’t it? Moreover, we note that her weekly has miles to go to overcome the past week’s $13.65 high, eh? Add to that, neither the daily nor weekly volumes lend support to the notion that she’s fair champing at the bit to run up much further.

You simply must admit these things, Ladies and Gentlemen, if you’re to be fair to yourselves- and your pocketbooks. Right, then. Other hand, miracles- man made and otherwise- do happen. So, with a little help from her friends, could she crest the Great Resistance at $14.03? Can she continue the breakout from the little 3-day symmetrical triangle? Or is the breakout just a fakeout? Or will she succumb to the fate prescribed by what looks suspiciously like an inverted daily cup and handle which threatens to bring her down to $11.50? On the other hand, do we, often as not, see Her Ladyship’s price go one way the day of earnings, only to reverse a day or two later? Caution is advised, I tell you, friends, caution is advised!

Let us then depart the crowd, leave behind the nattering herd, and descend into QuantLand. Thus turn we to Great Merlin, who was either lout, madman, incubus, or seer, according to your kind preference, and enquire of him, What prevails? And he replies, This algorithm might tell the tale, but beware false prophets who’ll drink your ale and give you nonsense for a shilling or two. But pay heed, nevertheless, lest they have the better part of truth!

Note in the chart below that we spawned a magenta Weekly bar last week (ended 4/8/16), and that this signal on BAC (it may differ in other securities) implies hard downside for the week which follows, in this case our current week ending 4/15/16.

BAC chart 4-12-2016

 

Narrative description of above algorithm: Though originally developed for oil futures, it’s applied here to a Weekly BAC chart, with a magenta price bar signaling a strong downturn within a couple of bars. Using FullStochastic, if FullD is greater than FullD of the previous week AT THE SAME TIME as FullK is less than FullK of the previous week, and AT THE SAME TIME as these conditions are met, the Emini Euro FX Futures contract (E7) is greater than E7 of the previous week, a Short signal is created by changing the color of the current bar. The Thinkscript form of code is bundled in with the little Thinkscript tutorial at OrangeQuant.com, and which can be run with a free demo account on TD Ameritrade Thinkorswim.

 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of FinancialPress.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://financialpress.com/legal-disclaimer/.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of FinancialPress.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://financialpress.com/legal-disclaimer/.

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