The S&P 500 could surge 8% on strong seasonality and a bullish technical pattern, BofA says

• The stock market could continue its uptrend and surge 8%, Bank of America said in a note on Tuesday.
• The bank pointed to strong seasonality and a developing cup and handle pattern that generates a 4,270 price target on the S&P 500.
• "Seasonality shines in April, which is the strongest month of the November to April period and is up 66% of the time," BofA said.
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Record highs in the stock market will continue to be made over the next few weeks if a Tuesday note from Bank of America pans out.

The bank expects the S&P 500 to hit a 4,270 price target derived from a bullish cup and handle pattern, which represents potential upside of 8% from Monday's close.

And it's a bullish backdrop for stocks to continue their uptrend based on seasonality data, as April is the strongest month of the best 6-month period of the year, according to the note.

"Seasonality shines in April, which is the strongest month of the November-April period and is up 66% of the time with an average return of 1.37%," BofA said. The bank's seasonality analysis is based on data going back to 1928.

On top of that, April is the second best month behind July in terms of average return, and the second best month behind December in terms of the percentage of time up, according to BofA.

From a technical perspective, BofA highlights big picture levels on the S&P 500, based on a bullish cup and handle pattern formed last year. A cup and handle often resembles a cup, formed by a basing pattern that typically looks like a "U," followed by a handle that is formed by a short-term down trend. This pattern usually extends an uptrend that is already in place.

BofA's 4,270 price target on the S&P 500 is based on a measured move of the depth of the cup formed in March of 2020 and the eventual breakout later in July.

Also favoring continued upside for the S&P 500 is new highs in Advance/Decline line, which indicates that underlying market breadth is strong. The Advance/Decline line measures the difference of stocks that are moving higher or lower on a daily basis.

"A bullish A-D line sets up the S&P 500 for a breakout above 3,950 - 3,960 that would favor upside to 4,065 next with the 2020 cup and handle target at 4,270," BofA said.

And if the S&P 500 does falter, investors should look to big picture support levels at 3,700, 3,550, and 3,200, BofA highlighted.