A Look At First Republic Bank's Chart Following SVB Financial Collapse

First Republic Bank (NYSE:FRC) slid more than 6% in the premarket on Wednesday after four days of extreme volatility.

The bank’s stock was decimated in the days following the collapse of SVB Financial Group, with investors fearing a widespread failure in the banking industry could be on the horizon.

Lower deposits during the second half of 2022 caused SVB’s balance sheet to turn negative, which Ark Invest founder Cathie Wood on Monday pegged as a consequence of a yield curve inversion, which she pointed out on Twitter last September.

Want direct analysis? Find me in the BZ Pro lounge! Click here for a free trial.

“U.S. demand deposits — which make up the vast majority of M2 — have been falling since last August. Now we are seeing the consequences of the yield curve inversion that began last July, which I feared last September and described in the thread below.

The inversion has worsened,” she wrote on Twitter.

On Monday morning, President Joe Biden attempted to calm fears during an address on the situation, stating "All customers who had deposits in these banks can rest assured they'll be protected, and they'll have access to their money as of today.”

The news caused First Republic to bounce up from its low-of-day on Monday and on Tuesday, the stock gapped up higher before selling off intraday, to close near its low-of-day.

The First Republic Chart: Although First Republic printed a bearish Marubozu candlestick on Tuesday, which usually indicates lower prices are in the cards, the stock’s relative strength index is so oversold that the candlestick isn’t a solid indicator. It’s possible that First Republic could print an inside bar pattern on Wednesday to consolidate the steep drop, with trading volume decreasing over time.

• From a technical standpoint, First Republic is trading in a downtrend, with the most recent lower high formed on March 6 at $123.70 and the most recent confirmed lower low printed at the $118.96 leave on March 2. For First Republic to negate its downtrend, the stock will need to either print a higher high or a higher low above Monday’s low-of-day, which occurred at $17.53.
• If First Republic breaks down from Tuesday's low-of-day, the high-of-day will be the next lower high within the downtrend.
• There’s a gap on First Republic’s chart, which was left behind on March 9 between $106.42 and $113.65. Because gaps on charts fill about 90% of the time, it’s likely the stock will rise up to fill the empty trading range at some point in the future, although it could be a long time before that happens unless it is a news-based move.
• First Republic has resistance above at $40.08 and $43.96 and support below at $37.13 and $34.60.

Next: Fed Mulling Tougher Rules For Midsize Banks: Report

Photo via Shutterstock.