(Note: The author of this fundamental analysis is a financial writer and portfolio manager.)

Shares of Bank Of America Corp. (BAC) have been rocketing higher recently, and will probably continue to head higher. In an Investopedia article from October 23, we noted that the stock could be headed to $40 a share based on technical analysis. And it looks like that bull-case scenario may play out.

The stock and the sector have climbed in recent weeks as the prospect of tax reform buoys the group. (See also: Bank of America Could Rise Nearly 50%.) 

Bank of America shares closed Monday at $29.09. A rise to $40 a share would represent an increase of about 37 percent. 

Technical Analysis - Support Bull Case

A technical analysis of Bank of America's chart continues to suggest the shares could approach $40. BAC stock broke through a significant hurdle when it rose above resistance at $25.50.

The stock has little to no resistance between its current price of around $29.09 and $39.75. The resistance at $39.75 dates back to September 2007. 

 

 

 

Recent Sector Rally

JPM Chart

JPM data by YCharts

Since November 27, shares of JP Morgan Chase & Co. (JPM) and Bank of America have each risen by about 10 percent. But it is likely Bank of America has even more room to increase.

Unlike JP Morgan, Bank of America's stock price has failed to come anywhere close to the highs seen before the meltdown of financial stocks during the crisis of 2008. 

A Game Of Catch-Up

JPM Chart

JPM data by YCharts

JP Morgan shares have recovered all of their losses from the financial crisis. Moreover, its stock price is now over 100 percent higher than it was before the meltdown.

In contrast, Bank of America's stock is still trading 42.5 percent below its pre-financial crisis highs. Ironically, although Bank of America's stock price has not recovered it past losses, its market cap is 35 percent higher than it was in 2007 because of the share dilution that occurred as a result of the crisis. 

JPM Market Cap Chart

JPM Market Cap data by YCharts

Bank of America's recent rise could indicate that the stock's spike may be in the very early stages of a further increase on the way to potentially $40.

 

Michael Kramer is the Founder of Mott Capital Management LLC, a registered investment adviser, and the manager of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of three to five years. Click here for Kramer's bio and his portfolio's holdingsInformation presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future performance.

Want to learn how to invest?

Get a free 10 week email series that will teach you how to start investing.

Delivered twice a week, straight to your inbox.