Blog

 

The Financial stocks have been rather quite of late as they seem to be drifting around waiting for 2Q earnings season to start.  Goldman Sachs (GS, $147.52, up $0.08) is making a run at $150 and Morgan Stanley (MS, $28.70, up $0.19) looks yummy below $30 but the one stock we are watching is Bank of America (BAC, $13.31, up $0.11).

 

There is so much news surrounding this stock that you could pick one subject and have a 3-hour water cooler talk about it.  However, the one thing that looks clear is the shares appears to be ready for a “breakout”.  Breakouts can be short or long in nature and BofA has been trading around $12-$13 for a month now. 

 

It’s most recent high was $13.93 back on June 12th which was when the November 15 calls (BYOKO, $1.30, up $0.04) were profiled as a trade.  The entry price was $1.50 for the calls and the stock peaked from there and has been consolidating ever since.  The good news is that we have gotten through the stock conversions but the better news is that there could be a change of their CEO…soon.

 

For those who don’t know, Ken Lewis has been calling the shots since 2001.  I don’t really have an opinion on the guy and all we care about is price movement.  Back in late April, Bank of America shareholders removed Lewis from his position as Chairman of the Board, but voted in favor of retaining him as the president and CEO. 

 

There have been recent rumblings that the Board is now considering a new CEO and that change could take place any day or next year.  Folks, the writing was on the wall when they stripped him of his Board Chairman title, and now he is being held accountable.

 

It was an important first step in laying the groundwork for an eventual change.  In my mind.  This is just me thinking out loud but the price action is pointing towards something.  The stock hit a high of $13.48 on Tuesday while the November 15’s made it to a high of $1.42.  

 

If the stock can manage to break through $14 then we could see a “breakout” to $17.  We don’t need the stock to go to $20 or $25 and if we can get $17 this trade will be a huge winner.  I don’t know if we get there this week but this is what I’m seeing, thinking and feeling.

 

I also wanted to list a few July call options to add to your Watch List.  These are not trade recommendations although there will be an opportunity to day trade these options and can be used IF the stock runs past $14.  These options are very active and the bid/ask prices are within pennies of each other.

 

The July 13 calls (BYOGM, $0.83, up $0.09) are slightly “in-the-money” and hit a high of 95 cents yesterday.  They opened at 65 cents.  That is a 50% gain from low to high.  These options traded nearly 29,000 contracts on Tuesday and have traded just under 5,000 contracts this morning.

 

The July 14 calls (BYOGN, $0.38, up $0.03) traded over 32,000 contracts and hit a high of 46 cents after opening at 30 cents.  Another 50% pop.  Again, these call options can be used if there is a clear sign of a breakout.  They have traded 7,000 contracts an hour into the trading session.  The November 15’s will do well if there is a surge but they won’t make the gains the July options do. 

 

In any event, we will probably have to wait until next week to see if we get a move over $14 for BofA but keep the July call options on your Watch Lists.

 

BTW, Green Mountain Coffee Roasters (GMCR, $60.19, up $1.07) is over $60 and the call options I mentioned from yesterday are seeing some action.  I’ll be back in the afternoon (or tonight) with another update.

Rick Rouse