Buy BOA, Sell GE and HP

Bank of America Corp (BAC US; US$5.76) – BUY

• Since our last Technical sell call, the stock fell to only US$3.00, short of its multi-year low at US$2.55. As we mentioned in our earlier report, the downtrend would likely have ended if the stock were to take out is bullish wedge resistance. Not only did it breakout of its bullish wedge pattern, it also surpassed its 30-day SMA, which is another bullish sign.

• Technical indicators are showing signs of bullishness, supporting the change in momentum towards the bulls. The breakout of its RSI is a plus and together with the bullish divergence on its MACD, the trend may have change. We need to see higher highs and higher lows to confirm the change in trend.

• Since its very short term indicators are extremely overbought, there could be a pullback soon. A pullback to its 30-day SMA at S$4.90 or S$3.66 (its wedge support) could be an opportunity to buy. Cut losses if prices falls back below the Feb lows of S$2.55. Note that there is still a big risk to take even buying at lower levels.

General Electric (GE US; US$9.62) – SELL

• The stock rebounded sharply from a low of US$5.73 to current prices in 2 weeks. That is a gain of about 68% without much correction. GE is also facing some resistance around current levels. Failure to take out its 30-day SMA (at US$9.74) would suggest that there are still a lot of sellers out there.
• Indicators are marginally positive. Its MACD continue to expand but its RSI is still in a neutral position.

• There is a strong possibility that the stock could ease from current levels to close the gap at USS$7.83-7.95. Support is seen at gap levels and also at US$8.40. Sell on upticks.

Hewlett-Packard Co (HPQ US; US$29.45) – SELL

• HP’s strong rebound has pushed the stock close to its 38.2% Fibonacci retracement (FR) levels (US$30.10). There is also a gap at US$29.96-30.08, which could act as a resistance as well. For now, the trend is still down unless this rally is strong enough to take out the 62% FR levels at US$33.00. Only then, the outlook would change for the better.

• In the short term, there could be a tad more upside but we do not expect it to be strong. MACD has just confirmed its golden cross but its RSI is still below the neutral mark.

• HP could retrace back to try to close the gap at US$27.11-27.60. A break below could even see the stock fall back to US$25.40 next.

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