U.S. bank and financial stocks, which had been in a funk since interest rates fell close to zero, have a good shot at beating the broader equity market in 2017. So the questions for investors are: “Which banks should I buy?” “Which banks that have already soared should I buy?” and “How should I diversify?”  

The chart

Before discussing bank earnings released Friday and investment opportunities in these stocks, let us build the necessary background so that you can better understand my recommendations. I am answering the question of what to buy, and when to buy, with the illustration of an annotated chart of Bank of America BAC,  Please click here to see the annotated chart of BAC.

Please observe the following from the chart.

  • Bank of America shares have outperformed since the election.
  • RSI, which is a momentum indicator, shows that the stock is overbought but is likely to be in demand on a pullback.
  • Volume has not been strong, indicating further demand on a decline.
  • The chart shows The Arora Report target zone of $28 to $32.
  • The chart shows the Arora “buy” zone of $17 to $21.31. Keep in mind that The Arora Report is still holding the original position, bought at $7.72. The stock is trading at a little over $23 as of this writing, for a gain of about 201%. The new buy zone shown on the chart is for those who don’t own the stock. Arora buy zones are designed for a 70% probability of a fill within 120 days.

In plain English, Bank of America is a buy if the stock should fall…Read more at MarketWatch


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