3 Financial Stocks That Just Flashed a Bullish Signal

Bank of America Corp (NYSE:BAC), Charles Schwab Corp (NYSE:SCHW), and MasterCard Inc (NYSE:MA) have recently touched historically significant trendlines

by Alex Eppstein

Published on Aug 13, 2015 at 2:38 PM

When it comes to predicting the future, there is no foolproof method. Nonetheless, technical traders always keep an eye trained on trendlines, as they often serve as support or resistance -- and can thus help predict a change of direction. Along those lines, several financial stocks have recently touched key moving averages. Here's a look at some recent signals from Bank of America Corp (NYSE:BAC), Charles Schwab Corp (NYSE:SCHW), and MasterCard Inc (NYSE:MA).

BAC has rallied 15% year-over-year to trade at $17.65, but a pullback from its late-July five-year high of $18.48 has the shares sitting in negative year-to-date territory. Nevertheless, the stock took a sharp bounce off its 80-day moving average yesterday, which has historically been a bullish indicator. In the 21 sessions following the last 11 signals, BAC has been positive 82% of the time, and averaged a gain of 4.3%.

Option traders are counting on a bounce. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Bank of America Corp has racked up a 10-day call/put volume ratio of 5.14, which ranks near the top quartile of its annual range.

Brokerage SCHW, meanwhile, has been a consistent outperformer, muscling 13% higher in 2015 to trade at $34.18 -- a chip-shot away from its 14-year peak of $35.72 from earlier this month. The stock may be primed to bounce, as well, considering it's just tagged its 80-day trendline. Based on a 21-day time frame, SCHW has moved north seven times following the previous 10 signals, with a typical gain of 1.8%.

A repeat performance is just what option traders are looking for. Going back two weeks at the ISE, CBOE, and PHLX, speculators have bought to open over 55,000 Charles Schwab Corp calls, compared to just 800 puts. In other words, bulls are alive and well.

Finally, MA sports a year-over-year advance of 28%, currently flirting with $97.73. On Monday, the stock hit a record high of $99.18. Afterward, the shares briefly dipped below their 40-day moving average -- which could hint at future upside. Following the last 12 comparable signals, MA has been positive nine times, with a typical 21-day gain of 3.4%.

Should this happen again, option bears could get burned. MasterCard Inc's 50-day ISE/CBOE/PHLX put/call volume ratio of 0.81 ranks just 7 percentage points from a 12-month peak. An unwinding of these pessimistic bets could result in tailwinds.

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