Bank of America - BAC - close: 16.49 change: +0.17 stop: 15.79

Why We Like It:
The first few days of earnings season have been characterized by investors selling the news without regard to whether the company's results were good or bad. That changed with BAC. The company missed earnings by 7 cents with a loss of 60 cents. Yet the stock rallied. Investors were focused on loan losses and BAC's loan loss reserves are actually starting to contract. That doesn't mean it's smooth sailing from here but the bank is seeing improvement. Now you could argue that today's gain in the stock price was a relief rally that the earnings results were not worse. I suspect investors might have grown more comfortable with BAC now that they have a little more clarity.

Shares of BAC have been trading in a bull-flag type of pattern the last few days. I'm suggesting we wait for a breakout and use a trigger to open positions at $16.80. More conservative traders could wait for a new relative high over $17.20. Our first target is $17.95. Our time frame is several weeks.

I would keep positions small. Our risk/reward is a little aggressive.

Annotated chart:

Entry on   January xx at $xx.xx <-- TRIGGER @ 16.80
Change since picked:     + 0.00 (small positions)
Earnings Date          01/20/10 (confirmed)    
Average Daily Volume:       161 million 
Listed on   January 20, 2009