The Chart du Jour

B of A: a Zig Higher to Be Faded

June 13, 2001

By, Barclay T. Leib

Chart produced using Advanced GET End-of-Day

J.P. Morgan has fallen over 12% in the past six trading sessions; Morgan Stanley is down slightly more than 10%; and GE had fallen approximately 5% over the same period of time into Monday's close, only to launch a fairly mean outside-day reversal higher Tuesday.

Is Tuesday's GE reversal sustainable? Looking at other financial sector chart patterns (yes, GE is a financial stock in our opinion since they have more than 50% of their income derived from GE Finance), we find the chart of Bank of America. Looking at its current formation, we doubt any stock within the financial sector will find long lasting upward sea legs at present.

But wait a minute, you might say, despite financial sector weakness elsewhere, Bank of America has recently been rallying. Yes it has -- to date. But in the chart above, we see a stock bumping up against strong overhead resistence in the form of its 200-week moving average. We also see a Fibonacci rhythm that suggests $31 as a longer term target here.

Now B of A may not have a derivatives book the size of JP Morgan's to worry about, but I would hazard to guess the bank certainly has a bigger exposure than Morgan to residential and commercial California real estate -- another knock-on dominoe just starting to fall apart after last year's tech wreck.

Some people may be attracted to B of A because of its relatively modest 13.8 p/e ratio, but for our money it's a trading sale with a stop loss set on a weekly close above $62.

Lastly, readers and new subscribers are asked to grant us a bit of slack this week. We will be travelling from Monday to Friday, and may or may not have the opportunity to update this site as much as we regularly do. Subscription requests will get filled, and instant access to recent subscriber-only articles is still available, but our confirming e-mail with password details may dally. Our apologies in advance.

Non-subscribers are invited to sign up for a quarterly subscription below. Sand Spring's latest "pattern match" thoughts of the June 1 Chart du Jour, plus our May 28th analysis "The Importance of June 2nd," as well as our May 5th article "Expert Short Picks," will all be accessible via an immediate e-mail. A user-id and password for web access to all past and future articles will then follow by a separate e-mail.

It may also be of interest to some that because so much time (and thus timeliness) has now transpired, we recently released three of our 2000 subscriber-only articles. These now appear under the public Earlier Articles section of the website. Perusing through them may give one a sense of the added premium level of analysis we provide to subscribers.

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