While Bank of America's stock (BAC) has gotten pounded over the last year we are going out on a limb and suggesting the stock has officially bottomed out as of yesterday. The BAC bears have seen their end.
We have three key reasons to support our claims.
1. Selling under $5 was mostly forced by mutual funds.
Most investors may not be aware but for bigger mutual funds it is in their rules that if a holding in their portfolio falls under $5 they are forced to sell the position completely outright with no questions asked. Wednesday and Thursday Bank of America stock traded a mind blowing 610 million and 757 million shares (respectively), both of which were records and forced.
2. The stock rallied to a strong positive close yesterday.
Right at the open a massive number of sell orders went through BAC stock forcing it down under $4 (see point 1 for why). The stock rallied the rest of the session to close back just under $5 a share on record volume. This successfully completed a critical bullish engulfment for the stock and perhaps claimed its ultimate bottom.
3. Ken Lewis is buying Millions worth shares at these low levels.
While "negative Nancies" as we call them will see this and go, "yay BUT.." we don't really care. The fact of the matter is every financial stock that has eventually gone bankrupt had zero buying from execs when the stock was getting killed. Why? They simply knew better. From today's Yahoo Finance:
In his latest move to show support of his bank, Bank of America Corp. Chief Executive Ken Lewis spent almost a million dollars this week to buy additional shares of his struggling bank.
Lewis purchased 200,000 shares for $958,340 on Wednesday, according to a filing with the Securities and Exchange Commission on Thursday. It's the second time in recent weeks that Lewis has pumped his own money into the Charlotte, N.C.-based bank. Two weeks ago, he bought 200,000 shares for $1.2 million.
Today Bank of America has successfully gapped back above $5 a share and is trading around $5.50. The low of $3.76 of yesterday is the ultimate low for BAC stock. It will not be seen again. Chart below.
Source:
BofA CEO Lewis buys nearly $1 million more shares
Ieva M. Augstums, AP Business Writer
Yahoo Finance, February 6, 2009, 10:06 am EST
