My near-term and 6-month pattern and momentum work on Bank of America (BAC) indicate that the price structure has some unfinished business on the downside prior to embarking on a sustainable rally period.

The very negative juxtaposition of the 21, 55, and 200 DMA's is creating significant downward price pressure, which, when coupled with the pattern that BAC has carved out off of its January recovery high at 15.31, projects lower prices into the 11.85/50 area next.

Such as decline will represent a retest of the November-December 2010 lows in and around 11.00. It will be during a retest that I will be watching closely for a significant upside reversal technical signal that BAC has finished its post-January 2011 correction. This should take the form of a multi-month, double-bottom base pattern that will have the potential to propel BAC to 15.00/30 and then 17.00-18.00 thereafter.

Only a sustained climb above 12.85 will begin to neutralize the current negative technical set-up, while a climb above 14.15 is needed to trigger initial upside reversal signals.

 

Mike Paulenoff is a 26-year veteran of the financial markets and author of MPTrader.com.