Bank of America Shares Could Deepen Their Slide

Bank of America slumps: Its shares have declined since August 15 and could extend further losses as the stock breached an important technical support area, Reuters technical analysis said.

It peaked at an all-time intraday high of $65.22 on August 17 before heading lower. After trading sideways through the beginning of September, the stock plummeted after CEO Brian Moynihan stated the bank predicted investment banking fee income to decline by at least 10% in Q3.

Bank of America had fallen to about three-and-a-half months low of $55.73. That threshold had been a level of support that marked the gap fill for the share's march higher from March to August. After the initial bottom there, the bank's shares fell back through that, and heading lower.

They support that view. Bollinger Bands have been expanding, as volatility ramps up, and the Moving Average Convergence Divergence indicator has also shown the downward trend extending. The Relative Strength Index has broken into oversold levels, though it has kept on confirming lows in the price rather than giving a clear reversal signal.

Considering the technical setup at this time, traders are watching support around $52.40. If it slips further, it could head toward the $50.35-$50.65 zone, which is where former tops and bottoms sit and where another level from the March-to-August advance retraced.

The shares slide also followed weakness across broader markets, as soaring government bond yields pressured sentiment. The U.S. 10-year Treasury yield climbed 3 basis points to 5.3445% on Thursday, touching the highest level in several years while rate-sensitive sectors like banking dragged lower as investors recalibrated the view on interest rates and inflation.

Bank of America has also cautioned that higher interest rates could constrain financing. Moynihan said the bank's investment banking pipeline was healthy but added that "some financing transactions, the volume will be lower due to increased cost of capital".

On the upside, the next key technical area for Bank of America shareholders may be closer to $52.40, with the $50.35-$50.65 band also worth noting. Moving back over $58.50 could, meanwhile, suggest that a near-term correction to the downside is running out of steam. Reuters noted that technical analysis is not a certainty of how prices will unfold and is not investment advice.