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For 2024, I'm Going 'BAC' to the Bank

Here's why I'm picking Bank of America as my stock pick for next year.
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Bank of America (BAC) has been showing some terrific strength over the past two months. Those eight weeks have been some of the strongest days going back to the remarkable run the stock made in 2021. That year, Bank of America, which is an Action Alerts PLUS holding, shot higher by 63% to the $45 level, but we soon discovered that would be near the top for this huge bank.

Let me explain why this is my pick for 2024, starting with a bit of history.

Early in 2022, the stock made new all-time highs, but then came crashing down as the economy would soon see a swoon from high inflation, as interest rates across the curve would rise steadily. But after a period of mostly sideways action amid volatility, we see BAC is on its way to making a substantial move higher. The fundamentals are supporting such a move, the Federal Reserve Open Market Committee is "talking" about rate cuts coming in 2024, their projections seem to point toward that action. Lower interest rates would be a positive stimulus in the economy and thus spur more business toward Bank of America. The economy is fairly healthy and if inflation continues its decline, the FOMC will have no choice but to reduce short-term rates. The recent bullish action in BAC tells us the market is sniffing this out and sees light at the end of the tunnel, we always know the market discounts future news and events.

For 2024, I have Bank of America on my list of the best performers. While other banks like JP Morgan (JPM) , Citigroup (C) and Wells Fargo (WFC) may also see money flowing towards their stocks, BAC offers a very strong business of mortgage underwriting, money lending, asset management and banking. The company remains one of the most widely-held names in the world and none other than one of Warren Buffett's largest holdings.

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When looking at a year's projection using technical analysis, I like to fan out to a weekly chart. This gives us a longer-term perspective and filters out the short-term noise we often see in a daily chart or even shorter time frames. The stock remains stuck in a range from $25 to $37, but is making progress toward the upper end. We would like to see BAC establish an uptrend, or a series of higher-highs and higher-lows. The recent run up does not fit that description, but a pullback toward a support zone (moving average or gap) could get the stock started on that path. Notice in 2021 in the chart, the big move up in the first half of the year stalled out and then a nasty correction ensued. That is what we might face if there is not a pullback soon. Be watchful for that pullback as we may see the opportunity to buy the stock.

One notable trait for BAC when it rises is the enormous volume or turnover we see. That is clearly evident in 2021 and also more recently. Of course, that knife cuts both ways: Heavy volume selling occurred in early 2023 that triggered a huge down draft that led to the October 2023 lows. So what's in store for Bank of America in 2024? We see a move toward those old 2022 highs at around $46, which from current levels would be a strong 39% gain. It may not be a straight shot similar to the move in 2021 but we think a slow, methodical uptrend to that height would be healthy and solid for BAC.

(BAC is a holding in the Action Alerts PLUS portfolio. Want to know when AAP sells or buys a stock? Click here.)

At the time of writing, Lang owned February and March 2024 call options, and some stock as well, for BAC.