Wednesday, September 7, 2011

Bank of America (BAC) Abandoned Baby Candlestick

I am noticing some interesting chart patterns on the XLF (Financial Sector ETF) and on Bank of America (BAC) in particular. Both charts are showing an inverse head-and-shoulders pattern on the daily time frame but with significant resistance on the weekly charts. Hence, I am expecting a short-term bounce before the long-term trend asserts itself.

Also worth noting is the abandoned baby candlestick pattern on Bank of America. It is a very rare bullish three-day reversal pattern when a stock is in a downtrend. The first day is a down day. The second day is a gap-down doji where the shadows do not intersect with either the first or third day. The last candle is an up day that also gapped away from the second day. I've circled it on the Bank of America daily chart below.

A short-term strengthening in the Financial Sector would be bullish for the market since it is such a large component of the S&P 500. It could help the S&P backtest to the 1260-1280 neckline/resistance area before failing, which fits in with my original thesis.

BAC daily:

BAC weekly:

XLF daily:

XLF weekly:

All charts courtesy of

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