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Jim Cramer often likes to consult technical analysis to confirm or deny a fundamental outlook. And this technical analysis couldn't be more bullish.
"I believe that 2014 is going to be a banner year for the banks, which benefit from rising interest rates," Cramer said. "And I think Bank of America in particular has enormous room to run because most of the litigation is now behind it, and its stock is still basically flat over the last three years, while rivals have already rebounded."
On fundamentals alone, Cramer thinks BofA is a buy. However, after consulting with technical analyst Tim Collins, he can barely contain his enthusiasm. Collins has noted a convergence of very positive patterns that also suggest the path of least resistance is higher.
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First, looking at the daily charts, he said the stock is coming out of a period of consolidation after a previous big push higher in November. Also, recent patterns in the so-called accumulation/distribution line appear bullish. On top of that Collins said the commodity channel index or CCI is signaling an extreme move higher.
Weekly charts say more of the same.
Since the beginning of last year, Bank of America stock has been in a very strong upward channel. While there were some ebbs and flows in the share price, with the stock occasionally dipping down to test its floor of support, those pullbacks would quickly lead to healthy rebounds. Also he found the relative strength index or RSI looked as it it was breaking out.
All told, Collins believes the patterns are classic signs of a breakout. He sees the stock heading to $17.80 in the short-term and higher than that, longer time.
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As noted above, Collins analysis seems to confirm something Cramer has been saying for a while now – Bank of America is a buy, buy buy!
"When you have a stock where the fundamentals are improving dramatically and the charts are extremely bullish, then you shouldn't hesitate to start building a position," Cramer said. "According to Tim Collins' chart work, Bank of America's amazing 2014 run could be far from over."
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