Chart Wars: What To Watch As First Republic, Bank Of America Pop Higher In This Trend

Zinger Key Points
  • The financial sector has suffered amid rising interest rates and stubborn inflation.
  • First Republic and Bank of America are trading in downtrends, with Bank of America appearing stronger.

First Republic Bank FRC and Bank of America Corporation BAC were trading higher Monday after it was announced First Citizens BancShares Inc (Delaware) Class A FCNCA agreed to purchase all loans and certain other assets of beleaguered Silicon Valley Bank SIVB.

The financial sector is suffering heavy turmoil amid rising interest rates and stubborn inflation, which recently contributed to the failure of SVB, Signature Bank and Swiss-based Credit Suisse.

First Republic and Bank of America have been trading in downtrends since early February but began to fall steeply on March 9, the day SVB announced a $1.25-billion common stock offering, which signaled the bank was in serious trouble.

See Also: SVB Financial CEO Sold $3.6M In Shares Prior To Bank's Collapse: Here Are Other Insider Sellers

Although First Republic and Bank of America were spiking higher on Monday, neither stock has yet to negate the downtrend. From a technical perspective, Bank of America looks stronger, having regained the eight-day exponential moving average (EMA) on the daily chart.

It should be noted that events affecting the general markets, negative or positive reactions to earnings prints and news headlines can quickly invalidate patterns and breakouts. As the saying goes, "the trend is your friend until it isn't," and any trader in a position should have a clear stop set in place and manage their risk versus reward.

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The First Republic Chart: After gapping up about 25% to start Monday’s trading session, First Republic ran into sellers who knocked the stock down toward the low-of-day. If First Republic closes the day near its low-of-day price, the stock will print a bearish Marubozu candlestick, which could indicate lower prices will come on Tuesday.

For First Republic to negate its downtrend, the stock will need to either print a higher high above the March 24 high of $19.44 or print a bullish reversal candlestick above Friday’s low of $11.74. If First Republic manages to print a higher high, the stock may find resistance at the eight-day EMA.

First Republic has resistance above at $21.88 and $23.46 and support below at $11.74 and the psychologically important $10 mark.

To negate its downtrend, Bank of America will need to pop up above the most recent lower high of $28.98, which was printed on March 21 or print a higher low above Friday’s low-of-day.

Bank of America has resistance above at $29.65 and $30.36 and support below at $27.65 and $26.32.

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