Is Bank of America Poised for Another Leg Lower?
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The shorter-term 80-day moving average is in the vicinity of the 320-day moving average and marked a short-term top on 6/20 and again earlier this week. Also, we saw strong interest in the 8-strike calls yesterday that expire on 7/13. These bullish bets might be viewed as a sell signal to contrarians. Finally, rallies lately have been stopped at BAC's 50% YTD return in the $8.34 area.
In the front three months of option open interest, calls outnumber puts by a ratio of 1.7:1. Despite ongoing weakness by this name, traders continue to step in and attempt to pick a bottom. Until this sentiment backdrop shifts, I see no reason for the current downtrend to reverse.
XLF just ran into trouble near its 80-day moving average. Also looks like it just completed a bearish island reversal with this morning's gap lower. Ugly picture if you are bullish financials here.
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