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4/26/12 10:28A ET: [ Warning Shot ] Shares of BAC are (1) dirt cheap <$10 and (2) positioned to advance sharply - like soon. Take note.
Apr 26, 2012
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4/26/12 10:20A ET: { Update } We re-entered a position in Cotton (BAL) at/near $57 and initiated positions in ZNGA at/near $9.
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4/25/12 11:15P ET: { Update } We entered a position in (X) at/near the bottom on Wednesday, 4/25/12.
Apr 25, 2012
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Game Plan For Bank Of America: Stay The Course
Bank of America (BAC)
As BAC nears the $8 mark, shorts have predictably shifted into overdrive. They're wasting both time and energy.
Note to my friends who like to play on the short side of the trade: I anticipate that we will see a bifurcated market sooner than later. Rather than shorting the financials, a 2012 leader, take a look at biotech and consumer staples. Look for defensive stocks to come out of favor in Q2 2012.
In my view, BAC has very limited downside right now.
Here's how I see things playing out in the coming days and weeks:
#1 I anticipate BAC will break above $8, possibly this week. Near-term, look for shares to retest that Buffet high back in September: $8.50-ish
#2 In the back half of February, BAC will likely pullback 10% to 15%, briefly touching down at or near $7.50-ish.
#3 Post pullback, BAC should rebound and hit resistance just shy of that Buffet high, at or near $8.50. Here, I expect shares will consolidate. Trading is likely to appear indecisive. Under this scenario, we're likely to see: (1) uncommitted investors exit stage left AND (2) shorts misinterpret investor indecision as weakness and overplay their hands - yet again.
#4 At some point in March, BAC will shake both weak hands and shorts and head north prior to the Q1 2012 results in April. Just before the report, I am looking for shares to potentially settle at or near the $10.30 area.
Last I checked, analysts were estimating that BAC would report $0.12 EPS in Q1 2012. As I recall, the company reported $0.17 during Q1 2011. At this time, I'd say the odds seem to favor a BAC beat.
With decent Q1 results, I believe BAC could reach as high as $12+ in April-May 2012.
Can I guarantee anything above? Heck no! I presume that adult investors understand the risks and believe they'll exercise good judgment.
If you don't like the common stock, consider BAC near-the-money MAY 2012 and JANUARY 2013 calls. Others are playing BAC's preferred shares and warrants. Do what you are most comfortable with doing.
Over the long haul, I believe that BAC will prove to be a solid investment.
Stay tuned.
Bottoming Process
Disclosure: I am long BAC.
The Big Move: Financials Are Positioned for Significant Advance
A Bold Bet on Bank of America (BAC)
Over the past three months or so, I’ve been building upon a longer-term position in BAC – allegedly the most hated bank in America.
For US banks, expectations are low and shares remain dirt cheap compared to many of their foreign peers. The big Canadian banks, for example are trading at/near 3 X their book value. Of the US lot, BAC has taken the worst beating, but I don't need to tell you that. Right now, BAC is trading at/near 0.28 X its book and 0.77 cash values.
A Shift in Sentiment?
On Friday, 1/6/12, BAC appears to have formed a bullish pennant pattern. I expect that we will get confirmation sometime this week, 1/9/12 to 1/13/12.
RECOMMENDATIONS
I recommend that investors buy either (1) shares of BAC common stock at/near $6 OR (2) near-the-money January 2013 calls. Whether investors elect to play shares or calls, use $15 as an exit target.
PRICE TARGET RANGE
My 1/18/13 price target range for BAC is set at $15–$20.
CATALYST
Going forward, I believe BAC is potentially setting up for a big move in the coming days and weeks.
On Friday, 1/13/12, JP Morgan (JPM) will lead off the big banks Q4 2011 results. I believe the JPM report might have an impact on BAC shares. Given that BAC is already setting up very nicely (reference the chart above), the JPM results are likely to have a positive impact on BAC as well as some of the other big banks. Let's see how it plays out.
On Thursday, 1/19/12, BAC is scheduled to report Q4 2011 results before the open. Between now and then, I think shares are likely to advance higher. IF the company provides some sort of positive guidance - sufficient enough to just exceed the already very low expectations, then look out - we might just see that big move, supra.
Note: Based on my current projections, I anticipate that shares could potentially trade at/near the $12 mark by May 2012.
Do I recommend that investors run out and buy up a bunch of near-term BAC calls? No!
You’ve gotta be patient and play it smart. If BAC gets a near-term boost, great. If, however, there's an underwhelming response to next Thursday's report, the longer-term positions recommended, supra, will give investors ample time for things to improve over the course of the year. And I firmly believe that the circumstances surrounding BAC will significantly improve in 2012.
CONCLUSION
Between now and 1/18/13, I am confident BAC will prove to be a solid investment. And that, you may hang your hat.
70 ETFs HOLDING BAC
OTHER PREFERRED FINANCIAL PLAYS
E*Trade (ETFC)
Broker
I prefer ETFC’s January 2013 $10 calls. My 1/18/13 target for ETFC is set at $15.
ICICI Bank (IBN)
Emerging Markets
Like BAC and ETFC, I prefer the January 2013 $30 calls. My 1/18/13 target for IBN is $40+.
iShares Dow Jones US Financial Sector (IYF)
Financial Select Sector SPDR (XLF)
Diversified ETF
Again, I would avoid the XLF options and just play the shares / units.
SEE ALSO
Happy Holidays!
I also hope you and your families have a joyous holiday season!
Merry Christmas and Happy Hanukkah!
Justin M. Hall
++ See Also: NORAD Tracks Santa