Bank of America Corp. (NYSE:BAC) and The Charles Schwab Corporation (NYSE:SCHW) both printed a third-quarter earnings beat on Monday before the market opened.
Bank of America
- The bank's reported revenue of $24.61 billion beat the $23.6 billion consensus estimate.
- Earnings per share were 81 cents, beating the 77-cent consensus estimate.
- The earnings beat caused Bank of America to gap up about 5% higher.
- JPMorgan Chase (NYSE:JPM) “set the bar quite high” when it printed a big third-quarter beat on Friday, but Bank of America “hurdled that high bar today,” UBS analyst Erika Najarian said.
- Bank of America’s “strong 3Q results may be tough for bears to pick on,” she added.
Schwab
- The financial services company opened higher following its earnings print but began to slide intraday.
- The company reported revenue of $5.5 billion, which beat the $5.41 billion consensus estimate.
- Earnings per share were $1.10, beating a consensus estimate of $1.05.
From a technical standpoint, Bank of America and Schwab on Monday were moving in the direction that was most likely, according to patterns that had developed on their charts. While Bank of America looks bullish and Schwab appears bearish, both stocks will likely enter into consolidation patterns over the coming days to absorb the recent moves.
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The Bank of America Chart: Bank of America gapped up to the 50-day simple moving average (SMA) on Monday and briefly shot up above the level. The stock ran into bears, however, who dropped Bank of America back down below the 50-day.
The 50-day SMA acts as heavy support and resistance and it’s often unlikely a stock will break up or down from the level on the first attempt. Bank of America may need to consolidate lower to print a higher low before gaining the steam required to break up above the area.
- On Friday, Bank of America negated the downtrend it had been trading in since Aug. 16, which indicated higher prices may come on Monday. If the stock closes the trading day near to flat, Bank of America will print a doji candlestick, which could indicate the higher high is in and a retracement will come on Tuesday.
- Bullish traders will want to see Bank of America print a bullish reversal candlestick above the most recent lower low of $29.31, which could offer a solid long entry. Bearish traders want to see Bank of American fall below that level or for the stock to print a lower high under the 50-day SMA, which could indicate the downtrend will resume.
- Bank of America has resistance above at $33.99 and $35.72 and support below at $32.77 and $31.64.
- Eventually Schwab, like Bank of America, will likely begin to trade sideways to consolidate the recent slide. When that happens, bullish traders will be watching for a reversal candlestick to develop, which could indicate a bounce is on the horizon, at least to print another lower high.
- Bearish traders can watch for Schwab to print a bearish reversal candlestick, such as a doji or shooting star candlestick, under the ascending trendline on the next bounce.
- Schwab has resistance above at $67.62 and $70.92 and support below at $64.56 and $61.45.
