Bank of America Is a Leader in the Banking Sector

I have been looking through the banking stocks, looking for stronger looking charts and the picture still seems shaky.  I believe this sector still needs some time to consolidate before it heads higher.  The volume that was seen on the bottom back in July was gigantic and gives us a strong indication that a washout occured.  However, markets rarely go straight up after such a severe debacle.  Actually, I would venture to say that 99% of the time, they do not.  A base needs to build.  This base will allow investors to digest what has happened and it will allow for the strong hands to take shares from the weak hands who have been holding all the way from the top.  This is called "cause".  A cause will lead at an effect and that effect needs to have a good base to move out of in order to be one of staying power.

I have not seen any significant bases put into the banking stocks yet.  In fact, many of them still look terrible and in a horrible downtrend.  Remember from our earlier posts, I want to see the pattern of lower highs and lower lows invalidated before I change my opinion on this sector.  The next few weeks should provide some fireworks in this market and will test the banking sector as a whole.  The way that the banks handle this upcoming move down in the market will be of utmost importance for those of you trying to buy some of these beaten up stocks.

Here is a leader of the pack:  Bank of America had all the makings of a major bottom being put in.  The volume crescendoed to record levels and we have seen a strong rally which has held up for the most part.  It wont be that easy, there will be some backfilling, of course.  We want to see this stock hold up strongly in the face of downward pressure in the market but it is looking good from where we sit.  Remember, PATIENCE will reward you.  Your entry is the most important part of this game.