A chart of Bank of America Corp.'s stock suggests that upside momentum had peaked nearly two months ago, or just one week after the election, although the stock's price had continued to rise. That is a pattern that chart watchers refer to as bearish technical divergence, and is believed to warn investors against buying on dips. The stock's Relative Strength Index (RSI), a momentum indicator that compares the magnitude of recent gains with the magnitude of losses, reached a 34-year high of 88.6 on Nov. 15--rises above 70.0 implies an overbought condition--and has steadily declined since to 61.9 as of Thursday afternoon. Meanwhile, the stock has run up 14% since Nov. 15, and remains just below the eight-year high of $23.39 hit in intraday trading on Dec. 15. This technical warning comes before the bank reports fourth-quarter results before Friday's open. Falling below the Dec. 29 intraday low of $21.77, which is 5.1% below current levels, would break the bullish pattern of higher lows that has been in place the past six months. The stock has run up 43% over the past three months, while the SPDR Financial Select Sector ETF has climbed 20% and the S&P 500 has gained 6%.
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