1. The stock has a beta of 2.41 -- quite high. High beta stocks will be appealing to short for those who are very confident in a forthcoming bear market, as a higher beta suggests greater volatility and a more powerful move in the direction of the overall market trend.
2. A P/E ratio of 38.18, more than twice that of the S&P 500, seems a bit excessive in my opinion -- doubly so when one considers that BAC is a mature company in a troubled industry (banking). Based on P/E ratio alone, I would expect price to fall by 50%.
3. The technicals are particularly appealing, in my opinion. Below is a daily chart. Note the RSI divergence -- prices make new highs, but RSI does not. This suggests the uptrend is running out of strength. We also see a doji and an inverted hammer in the last two candles -- this fact, coupled with the rangebound price action, also suggest the uptrend is running out.
On the weekly chart (see below), we also see RSI divergence. The weekly chart also shows resistance at around 18.30, with support at 12.30. This creates an opportunity to short at a favorable risk/reward ratio -- the stop-loss order can be placed just above resistance, with the profit target being support.
Disclosure: No position.
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