We just witnessed a furious bear market rally in 16 trading days. The DOW rallied 14% in 16 trading days but it failed to produce a weekly reversal signal in the maximum allowed time length of 3 weeks against the December low. The weekly reversal signal is needed to enable the market to continue to move up from here.
We are long term bullish on BAC. We published a blog on BAC 2009-2016 multi-year breakout on January 6, 2017. But the recent breakout at the 15th week in the weekly cycle is not trustworthy. We believe this breakout pattern will fail due to the cycle position (too late in the game). In a week or so it may fall back into the range again.
At 11:58am today, we posted a chart stating the intraday bounce to the 38% retracement was likely over if the price was able to violate 22.17 on the downside. It stopped right at 22.18 and turned around to take out the previous high @22.58. It closed at 22.63. The action from 22.18 low to 22.63 was commendable on the bull side. The strength of the rally was impressive.
BAC bounced to 22.58 to meet resistance at R1 and 38% retracement of the swing from 23.41-22.01. It breached daily pivot range high at 22.40, but was unable to breach 3-day rolling pivot range high at 22.71. Once it violates 22.17 to the downside, it will resume selloff to test 21.77. If it can’t take out 21.77, it just means BAC is taking a break on the downside.
We shorted BAC at 23.22 on Friday Jan. 13, 2017. Our stop loss is 23.41. Since we opened the position, we never had paper loss on the open equity. Today was the 11th bar in the third daily cycle. The daily cycle went on schedule without a hitch. It gapped down at open and bears were in control the entire day. The fact it closed very near the low of the day
