Standing Pat

Banks have been all the rage, but Bank of America (BAC) hit a bump today. For anyone long in the prior week, this feels more like a mountain than a bump but, for now, we are only talking a 4% to 5% dip. For a stock that has run like BAC, this really isn't much in the big picture. Looking at the daily chart, BAC appears to be testing uptrend support that goes all the way back to November, when this recent 30% run higher began.

Bank of America (BAC) Source: View Chart » View in New Window »

The price breakdown, along with breakdowns in the Relative Strength Indicator (RSI) and stochastics, is clear. We often see a bounce back in the stochastics and RSI after a run higher like this, only to see them turn lower again. To me, the only long-side trade for BAC would be to buy here and look for a bounce back to $12. But I don't like the risk-reward on that trade. There are better charts in the financial sector, but this group as a whole seems poised to pause. There is no logic buying BAC on the first significant pullback after only one day when $11.25, or even $10.60, is a very real possibility....151 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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