Bank of America closed Friday out at $15.19 per share, which is awfully close to the company's 1 year low at $15.15 per share. So, what's causing the decline? Is Bank of America likely to break through its 1 year low? And, how can binary options traders take advantage of the trends? Today, I'll do my best to answer all of these questions…
Why Bank of America Is Experiencing Declines
If you were watching Bank of America in November, you may have never expected the stock to fall so much. While I could have never predicted how quickly the stock would drop, I have to say… I predicted the declines! Here are the reasons we're seeing declines…
Climbs Ahead Of The Rate Hike – As mentioned above, Bank of America did incredibly well in the month of November. That's because investors had unrealistic expectations with regard to how the Federal Reserve's rate hike would affect the stock. Essentially, higher interest rates are a great thing for big banks. As a result, in the month of November, Bank of America climbed by more than 10%. However, the rate hike was so minimal that it simply didn't do what investors wanted it to do. As a result, the stock was heavily overvalued, and following the rate hike, that value started to chip away.
Chinese Market Crash – As the value of Bank of America was in the midst of a slow and steady decline, more bad news came in. On the first trading session of the new year, China's market crashed in a big way. In fact, after falling 7%, the market simply couldn't close fast enough. Because China's economy is so massive, when a crash happens in China, it's felt around the world. Unfortunately for Bank of America and its investors, the stock simply wasn't immune to the effects.
The bottom line is that unrealistic expectations caused Bank of America to soar in the market in November. This brought the stock to a relatively high valuation, leading to heavy resistance in the market. Then, when China's stock market crashed, it proved to be the straw that broke the camel's back, leading to the massive declines we've seen as of late.
Will Bank of America Break Its 1 Year Low?
In my opinion, a decline below the level of $15.15 per share is inevitable. The reality is that the underlying factors associated with the global market crash spell out a very grim story. After years of bullish activity, it seems as though the bears are going to start taking control of market activity. With that said, I'm expecting to see downtrends on the stock that bring it well below its 1 year low. In fact, I wouldn't be surprised to see $14 per share in the near future.
How Binary Options Traders Can Take Advantage Of The Trends
As binary options traders, it is our job to predict what's likely to happen in the market moving forward. Thankfully, at the moment, this is a relatively simple job. The bottom line is that Bank of America hasn't hit bottom yet and won't likely hit bottom for quite some time. As a result, binary options traders should watch the stock for strong put option opportunities. This will allow traders to follow the trends down to the profits.
What Do You Think?
Where do you think Bank of America is headed and why? Let us know your opinion in the comments below and read more financial news by TheBinaryAdvisor.
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