Is First National Bank Headed Below $3? A Look At The Technicals

First Republic Bank FRC opened slightly higher Friday but has been trading mostly sideways since it was announced that the FDIC may downgrade the bank, effectively limiting its ability to borrow from the Federal Reserve.

The regional bank has been hit hard since the collapse of Silicon Valley Bank and Signature Bank, plunging 86% between March 7 and Monday, followed by another 60% drop this week.

The stock price could drop even further from a technical analysis perspective because First Republic is settling into a possible bear flag pattern on the daily chart.

See Also: First Republic Bank Shares Sink With Report Of Government Unwilling To Come To The Rescue

The bear flag pattern is created with a steep drop lower forming the pole, which is then followed by a consolidation pattern that brings the stock higher between a channel with parallel lines or into a tightening triangle pattern.

For bullish traders, the "trend is your friend" (until it's not) and the stock may continue to rise upwards within the following channel for a short period of time. Aggressive traders may decide to purchase the stock at the lower trend line and exit the trade at the higher trend line.

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The First Republic Chart: First Republic’s bear flag pattern was printed this week, with the downward sloping pole formed between Monday and Wednesday and the flag forming over the trading days that have followed. The measured move of the pattern is about 60%, which suggests the bank could fall toward the $2.60 level.

• Traders can watch for the stock to break down from the flag formation on higher-than-average volume to indicate the pattern was recognized. If bullish volume comes in and pushes First Republic up over the eight-day exponential moving average (EMA), the bear flag will be negated.
• Bullish traders want to see big bullish volume come in and break First Republic up above the eight-day EMA and then for momentum to negate the stock’s downtrend. Bearish traders want to see the stock break down under $4.76, which would indicate the downtrend will continue to drop the stock lower.
• First Republic has resistance above at $11.74 and $16.76 and support below at the psychologically important $5 mark and at $4.76.