Bank of America Corporation (BAC) shares rose more than 6% over the past two days after Jay Powell testified at his Federal Reserve chairman confirmation hearing on Tuesday. When asked whether post-crisis regulations needed to be further strengthened, Powell indicated that the regulations are "tough enough" and that there are no longer any banks that are "too big to fail." This anti-regulatory stance was seen as a positive for the banking sector.

The $1.6 billion leveraged buyout of Barracuda Networks by Thoma Bravo has also opened the door to more private equity deals among larger banks. In the past, these banks had scaled back such deals to alternative lenders, but the acting comptroller of currency seems to be open to larger and more expensive deals. The Barracuda Networks transaction was valued at about 9x EBITDA – far higher than the 6x guidance from past regulators. (See also: Barracuda Networks Is Acquired for $1.6 Billion.)

Technical chart showing the performance of Bank of America Corporation (BAC) stock

From a technical standpoint, Bank of America stock broke out from prior highs made last month to R1 resistance at $28.54. The relative strength index (RSI) moved to overbought levels at 70.69, but the moving average convergence divergence (MACD) experienced a bullish crossover that could signal the start of an intermediate trend higher. Traders should maintain a bullish bias on the stock given the favorable regulatory changes in the pipeline.

Traders should watch for a breakout from R1 resistance at $28.54 to upper trendline resistance at $29.00 or R2 resistance at $29.69. If the stock breaks below its prior highs, traders should watch for a move to retest the pivot point and trendline support levels at around $26.83 before the stock makes another attempt higher. The lofty RSI reading suggests that the stock could consolidate at around $28.00 before making a significant move higher. (For more, see: Short Goldman Sachs, Buy Bank of America: Bove.)

Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.

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.