Bank of America Corp (NYSE:BAC) is too quiet this week with the volatility fully compressed and that is clearly evident from the $0.37 range for the last two days. The FOMC meet is on everybody’s mind now and that is keeping nearly all the stocks in a limbo, particularly the financial stocks. That meet will end today and whatever words come out of the Fed, one thing is assured and that is the expansion of volatility.
The Fed granted Bank of America Corp (NYSE:BAC) only a conditional approval of its capital program after the last round of the stress test. Obviously, that didn’t go very well for the bank as it was one those six banks among the 31 tested, which failed to raise their dividends on the results. It doesn’t bode well as it reminded the investors of the two instances last year, when the bank had to scale back its plans to return cash to the shareholders. The dividend yield at 1.3% is considerably lower compared to the peers.
Some analysts keep expecting a rosy future for the stock based on the bank’s attempts to improve the quality of the assets, like issuing 1.2 million new credit cards in the last quarter. Perhaps a bit of quality risk management and avoiding legal issues would help the bank to increase its valuation too.
The technical picture looks much clearer if the longer term charts are seen. At the January low of $15, the stock has tested a long term trendline support keeping the uptrend intact so far but to really expect a good return, the stock must overcome the long term supply in the band of $18-$20.
As long as the stock keeps trading above $15, a retest of $18 can be expected in the short term, but long term investors should keep an eye on the price action near $18-$20.